If you use prepaid cards, you should know that federal regulations are coming. In October 2016, Consumer Financial Protection Bureau (CFPB) published rules about prepaid cards that make them more like credit cards. Previously, consumers had limited federal protections.
Prepaid cards have a balance and can be used as an alternative to credit or debit cards for purchases in stores or at ATMs. You or a third party, such as your employer, can load funds onto a prepaid card.
CFPB’s rules clarify the fees, functions and features of prepaid cards, and that’s a good thing, experts say.
“Consumers will be protected from fraud and have access to more information about their cards, as well as easier access to their accounts,” says Christine Hines of National Association of Consumer Advocates.
The rules, which are expected to take effect October 2017, include fraud protections that limit a consumer’s liability to $50 and require financial institutions to resolve any fraud issues in a timely manner.
They also include “Know Before You Owe” disclosures that will provide transparency about fees and other account details. Consumers will have access to account information by phone, online or upon written request.
Until then, consumers should review the fee information and other terms on any prepaid card before they buy one, Hines says. Fees can run as high as $9.95 for monthly maintenance and activation, $2.50 to use an ATM and $3 for a balance inquiry, according to Bankrate.