The proliferation of prepaid cards is increasing rapidly as many companies create their own prepaid cards to appeal to consumers. Prepaid cards are used much like the debit cards attached to a checking account, but are not backed by a bank account with federal protections. It has been estimated that the number of adults in the United States using prepaid cards increased by nearly 13% in the past year. There are some myths associated with prepaid cards that can affect the way that they are used, so it is important to know the facts about prepaid cards so that they can be used correctly.
Myth – Prepaid Cards And Gift Cards Are The Same
There are a number of differences between gift cards and prepaid cards that can make it beneficial to purchase one or the other. Gift cards are loaded with a preset amount of money and cannot be reloaded with more cash. Prepaid cards can be loaded with any amount of money and can be reloaded at anytime. Gift cards do not generally have fees associated with them while prepaid cards can have a number of fees associated with them. You can also get a Personal Identification Number (PIN) assigned to a prepaid card so that you can withdraw cash at an ATM.
Myth – Prepaid Card Fees Are Standard Across The Board
The companies that issue prepaid cards can charge whatever fees they want to charge as long as they are disclosed in the terms and conditions of the card agreement. Fees can vary dramatically from card to card and depend greatly on the cardholder uses the card. Although growing competition in the prepaid market has lowered overall fees for many cards and made disclosures more transparent, some prepaid card issuers try to charge as many fees as they can in the hopes that you won’t notice or care until it is too late and they have your money.
Myth – Funds Are Safe On A Prepaid Card
Many people mistakenly believe that a prepaid card has the same protections as a credit card or a bank issued debit card. However, there is no law on the books that requires prepaid card issuers to to insure or protect funds on the card if the card is lost or stolen. Many card issuers have chosen to follow the same policies as banks regarding lost or stolen funds, but it is voluntary and decided by each company. To find out if the prepaid card that you are interested in is protected, examine the card’s disclosure agreement.