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.
