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Prepaid debit cards and protection from fraud

[Thursday, January 20th, 2011]

Prepaid cards are being used as a method of payment by many people these days. According to the Federal Reserve an estimated 17% of Americans are currently using prepaid debit cards. In fact, the number could increase with more people getting rid of their credit card debts and the card itself. Customers have to be aware that consumer protection and security for these prepaid cards are not as good as traditional debit and credit cards.

Customers can reload their cards and use them like conventional debit cards or transactional charge cards. In fact, these prepaid cards also look like the standard cards with MasterCard or Visa logos and account numbers.  The biggest customers for prepaid cards are those who don’t have a good enough credit history to get credit line or who are under-banked. Some customers who don’t trust the credit card issuers have also turned to using prepaid cards. Although there are efforts of reforms by regulators, customers must know that prepaid cards would leave them more vulnerable than ever.

The consumer protection that is offered by these cards is voluntary and can be altered by the company at any time for any reason. There is no FDIC insurance of the money that is loaded, even though some issuers are backed by FDIC. Customers whose cards are not backed might not be able to recover the full money loaded in the event of a card fraud or if the issuer goes broke.

See also

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Q: Why Prepaid Cards Are The Hottest Financial Trend Going

Prepaid cards are suddenly everywhere, it seems. Teenagers have them, college kids have them, parents have them, and even grandparents are using them.

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Q: A Beginner’s Guide To Prepaid Cards

Question: When is a credit card not a credit card?
Answer: When it’s a prepaid card.

Do you know the ins and outs of prepaid cards? If not – if, perhaps, you aren’t even entirely sure what a prepaid card is – then this article will tell you all you need to know.

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Q: The 4 Types of Cards Most People Carry

Most of us have wallets packed with plastic—but what exactly is it that we’re carrying around, anyway? It’s not just credit cards, although the average household has more than three credit card accounts.

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Q: Prepaid Cards: A Guide to the Different Types

When it comes to prepaid cards, it’s not unusual to get a little confused as to the different types out there. Prepaid cards are more popular than ever and no two are exactly the same.

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