Buzz
Prepaid debit cards can serve as an effective way to limit overspending or even help build credit. With new regulations from the Consumer Financial Protection Bureau (CFPB), these cards will soon enjoy the same protections as standard debit and credit cards.
The new CFPB regulations will apply to most prepaid debit cards, including those purchased from retailers, payroll cards, benefit cards, and student loan cards. While these protections won't take effect until next October, here are some of the key benefits, as reported by Consumerist:
Free and Easy Access to Account Information
: Banks will be required to provide periodic account statements or allow balance inquiries via phone, offering at least 12 months of transaction history online, and if requested, up to 24 months of written statements—all at no cost….
Limited Liability for Fraudulent Transactions
: A new rule will limit consumers' liability for unauthorized charges. If a prepaid cardholder reports an unauthorized transaction within two business days, their liability will be capped at $50….
Increased Transparency
: Prepaid cards must now clearly display their fees, providing consumers with a detailed breakdown of costs before making a purchase.
A significant issue with these cards is their common association with payday loan services. While they still function as prepaid cards, issuers often include a credit line advertised as ‘overdraft protection,’ when in fact, it is simply a payday loan.
The new regulations require issuers to comply with many provisions of the CARD Act. For example, in the first year of a credit account, the total fees must not exceed 25% of the credit limit. This is just one of many protections in place, and you can learn more about the changes at the links below.
Photo by Beau Giles.
