credit & debt

Better Protections for Prepaid Debit Cards

Register your card to ensure you’re covered.

Thanks to federal rules that recently went into effect, users of prepaid debit cards enjoy protections closer to those of debit cards tied to checking accounts. The rules also apply to payroll and government-benefits cards, such as the ones used to pay Social Security benefits, as well as digital wallets and peer-to-peer payment apps that can store funds, such as Venmo and PayPal. (Gift cards aren’t included under the new rules.) Register your prepaid card with the issuer to ensure you get all the new protections.

Prepaid cards now have the basic fraud and error-resolution safeguards that standard debit cards do. If you notify the issuer of unauthorized charges on your prepaid card within two business days of learning about a loss or theft, your legal liability is capped at $50; otherwise, your liability could be up to $500 if you wait up to 60 days and unlimited after 60 days. You also have the right to dispute erroneous charges.

Prepaid cards are notorious for their fees, and now certain fees have to be outlined on a card’s exterior packaging, including monthly or annual fees, ATM-withdrawal fees, and cash-reload fees. (Issuers also have to provide a more detailed fee listing inside the packaging or on the issuer’s website.)

Cards must also state whether they are eligible for Federal Deposit Insurance Corp. coverage, which insures your funds up to certain limits in case of bank failure. If a card offers an overdraft program, the issuer has to disclose it. And basic information must be accessible: If the issuer does not provide periodic statements, the account balance has to be available by telephone, and transactions from the past 12 months must be available online.

As you shop, clear and uniform product information should help you compare prepaid cards more easily. We like the Bluebird by American Express & Walmart card because it’s light on fees, comes with FDIC coverage and offers handy features, including basic budgeting tools and the ability to manage and set limits on subaccounts, such as those for children.

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