Prepaid Debit Card Reviews, Complaints, Etc

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  • Chicago Introduces Transit Card With Prepaid Option

    Chicago Introduces Transit Card With Prepaid Option

    Prepaid debit cards are now – or at least soon will be – a constant presence on Chicago’s many buses and subway cars. According to a story in the Chicago Tribune, September 9 was the official launch of the so-called Ventra card, a new way for Chicago’s thousands of commuters to pay their fares.

    According to the article, written by Jon Hilkevitch, Ventra cards went on sale on September 9 at vending machines located throughout Chicago Transit Authority (CTA) stations as well as at stores like Walgreens and CVS. The plastic Ventra cards, which cost commuters $5 to purchase – although that amount is credited back for use in paying transit fares if an owner registers their card – are being heavily marketed as transit officials begin a push to retire the paper and plastic transit cards it has issued to riders over the past two decades. The move to plastic cards issued by Ventra – the Latin term for wind, a nod to Chicago’s designation as the Windy City – is expected to save the CTA $50 million over the next decade.

    Understandably, much of the current media attention devoted to the Ventra cards centers on how Chicagoans can transition from using Chicago Card transit cards and other paper tickets to the new option; basically, riders have to wave the radio frequency identification (RFID) enabled over a reader as they enter a subway station or board a bus. Although of less immediate concern to riders of Chicago’s public transport system is a new option that allows Ventra card holders to also open a prepaid debit MasterCard account.

    The new Ventra prepaid debit card is being promoted as a way for transit users to have one card that allows them to both ride the subway and make routine purchases. Like most prepaid cards, the new Ventra version has a host of fees, including a charge of $5 to replace a lost or stolen card, $4.95 to add cash to an account and a $2 monthly account maintenance fee. No doubt, the issuers of the Ventra prepaid debit card hope those who use it will have an easier time than some of the passengers who attempted to use the new fare card on the first day. According to another Chicago Tribune story, there were glitches and complaints aplenty.

  • Prepaid Debit Card Scams Proliferate

    Prepaid Debit Card Scams Proliferate

    Prepaid debit cards are becoming an increasingly popular tool for criminals.

    By Shane Tripcony

    Over the summer utility customers from Virginia to Pennsylvania to California have been targeted in a scam that closely resembles one that was reported on recently by The Beach Reporter in Manhattan Beach, California. In an article titled, “Edison warns its customers of utility bill scam,” the paper told its readers that Southern California Edison customers have been receiving phone calls from people claiming to be from the utility demanding payment for past-due electricity bills.

    The paper reports that the callers threaten Edison customers with having their electricity cut off if they don’t make an immediate payment using a prepaid debit card. As of September, Edison says that about 150 businesses and residents had been victimized at an average cost between $800 and $1000.

    While popular, the utility scam is not the only type that relies on the use of prepaid debit cards. According to a story in the Arizona Republic, two citizens of Surprise, Arizona were indicted in a $2.5 million income-tax scheme involving prepaid debit cards. According to the charges brought by the U.S. Department of Justice, the alleged perpetrators told victims that they could receive “Obama stimulus money” or “government funding” via a prepaid debit card. In return for that promised government money, victims handed over personal information that was used by the alleged criminals to file false federal income-tax returns. In total, the 18-count indictment by the federal government says that the perpetrators received over $2.5 million in refunds.

    A similar scheme also resulted in prison time for a Cincinnati man. According to a report on Cincinnati.com, Dione Howard was sentenced to 12 months and one day in prison and ordered to pay $30,129 to the Internal Revenue Service for his involvement in a crime involving prepaid debit cards. Citing court documents, the report says that Howard purchased 18 names, social security numbers and dates of birth and used them to file false income-tax forms. Howard received a total of $30,129 in fraudulent refunds.

    “This unscrupulous defendant thought he had figured out a clever scheme to thwart the IRS and steal from the American taxpayers,” the story quoted Kathy Enstrom, special agent in charge, IRS Criminal Investigation in the Cincinnati Field Office as saying. “The IRS has made investigating refund fraud and identity theft a top priority and we will vigorously pursue those who undermine the integrity of the U.S. tax system.”

  • Tax Refunds And Prepaid Debit Cards

    Tax Refunds And Prepaid Debit Cards

    Prepaid debit cards have recently become a favored way for states and the federal government to pay tax refunds, but for consumers, whether it is a benefit or not – the answer is, it depends.

    By Shane Tripcony

    The arguments in favor of the use of prepaid debit cards over paper checks in states like Connecticut, Georgia and Louisiana are similar. Not only do citizens who lack a bank account – and therefore cannot take advantage of direct deposit – receive their refund quicker than if it came through the mail in the form of a paper check, but the governments themselves like prepaid debit cards because it save them money.

    Those are a few of the issues John Friedman took up in a recent story for Bloomberg Law entitled, “Policy Perspectives On Tax Refunds: An Economic Analysis Of Government-Sponsored Debit Card Refunds.” Friedman, an assistant professor of public policy at the Harvard Kennedy School and a faculty research fellow at the National Bureau of Economic Research, does an in-depth cost-benefit analysis of the embrace of prepaid debit cards and arrives at some conclusions that go counter to many of the arguments policymakers have made.

    To be sure, Friedman acknowledges just how popular prepaid debit cards have become as a way to dispense tax refunds. In fact, he notes that in the 2012 tax year, almost 20 million taxpayers opted for prepaid debit cards to receive their refunds. Still, despite that increasing popularity, Friedman takes direct aim at the seemingly uncomplicated assertion that governments, and thereby taxpayers, save money by utilizing prepaid debit cards.Even though states like Connecticut report that they saved about $300,000 by sending out prepaid cards instead of paper checks in 2012, Friedman points out that those calculations fail to acknowledge that governments don’t pay account setup fees; instead, taxpayers do. “It is true that state governments can cut their own costs by switching to debit cards from paper checks, but this simply pushes costs off the government budget and onto taxpayers directly in the form of fees,” he writes. “The roughly $1 of government savings is very small in comparison with the average fees incurred by individuals who received their tax refunds via debit card.”

    Although he acknowledges that some taxpayers truly benefit by receiving their tax refunds on a prepaid debit card instead of a check, in particular because of the speed at which it arrives. This speedy refund, he says, means that high-interest debts on payday loans can be paid down quickly and that exorbitant check cashing fees can be avoided. But Friedman also says that the fees that come with the normal use of prepaid cards could make them a less attractive option for others. “Therefore, use of the debit card to receive the tax refund is not costless to individuals,” he says. Because prepaid debit cards are a mixed bag, good for some but bad for others, Friedman urges governments to still offer taxpayers the option of receiving refunds via a paper check.

  • Risky New Bank Card Technology – Is Your Card At Risk

    Risky New Bank Card Technology – Is Your Card At Risk

    It sounds like a great idea. A host of new credit and debit cards issued by big financial players like Chase and MasterCard come armed with small computer chips and radio antennae that allow consumers to make payments by literally waving their plastic over a card reader. But according to a story in Consumer Reports Magazine, in exchange for the convenience of these so-called contactless cards their holders face increased risk of being victimized by thieves.

    Here’s the main problem: the very same technology – often a radio frequency identification, or RFID, chip – that makes it such a snap to hand over debit or credit card information to a merchant is also what makes it easy for a thief to lift those vital numbers themselves. That’s because criminals need only to get their hands on the sort of card reader stores use, which is easy because they sell for less than $100. Armed with a reader, a thief must only get within a few inches of a victim’s card in order to swipe the account number and expiration date, which can then easily be transferred to blank cards. Unfortunately, that means a crook can start making purchases with a counterfeit card, even if a victim still physically has theirs in their wallet or purse.

    So how do you know if your cards use this technology? Chase cards have labeled their contactless cards “Blink,” MasterCard’s are called “Pay Pass,” and others simply have a symbol consisting of four curved lines. There are plenty of people who have one. Citing The Nilson Report, a newsletter, the Consumer Reports story says 35 million contactless cards are in circulation in the U.S. alone.

    If you do have a contactless card, protecting yourself is not necessarily easy. There are wallets with shields that market themselves as RFID blockers. Although they can make it more difficult for an electromagnetic reader to swipe your account information, they don’t entirely block the transmission of card data. Another option is a protective sleeve made out of duct tape and lined with aluminum foil. Consumer Reports tests show that approach was superior to many options available for purchase but still didn’t offer complete protection. Probably the best method of protection is to ask for a card that doesn’t have this technology.

    Representatives of the credit and debit card industry insisted to Consumer Reports that contactless cards are safe. Chase spokesman Paul Hartwick told the magazine that the security codes on its contactless cards are designed to change with every transaction so that even if a card were compromised it would work for only one fraudulent transaction.

    The Smart Card Alliance, an industry group, maintains that contactless card technology deployed by American Express, Discover, MasterCard, and Visa is secure and that there have been no reports that consumers have been victimized.  American Express says its contactless cards do not reveal the card account number, and Consumer Reports’ own tests supported this assertion.

    According to Kevin Fu, a University of Massachusetts at Amherst assistant professor, the absence of a flood of fraud reports linked to the cards is not proof of their security.  Because the contactless cards in circulation in the U.S. represent only 3.5 percent of the total debit and credit cards in use, they have not yet presented a big enough target to lure many crooks, especially when traditional magnetic stripe cards are so easily counterfeited.

  • City Embraces Gift Cards – Iowa City turns to gift cards to boost downtown businesses

    City Embraces Gift Cards – Iowa City turns to gift cards to boost downtown businesses

    Keep Austin Weird. Many people don’t realize that the slogan that is now so closely associated with the quirky capital city of Texas was originally coined as a rallying cry for citizens to favor local businesses over national chains with their spending dollars.

    Austin’s efforts to bolster local businesses has been successful enough that other cities, like Louisville, Kentucky, have swiped the exact same phrase and used it as a way for restaurants, bars and clothing stores to brand themselves. Now there’s another way for businesses to band together to encourage their friends and neighbors to patronize their shops: by starting a gift card program.

    According to a story in The Daily Iowan, that’s exactly what businesses in the Downtown District of Iowa City did this past Aug. The idea was the brainchild of the Downtown District, which cited the success of other cities like Des Moines in offering a single gift card that can be utilized at numerous businesses in a small geographic area.

    In her story, reporter Gabriela Dunn writes that the gift card program cost $7,000 to launch and that 85 of 280 downtown businesses have agreed to accept the cards. According to Betsy Potter, the Downtown District operations director, local businesses have been vocal in their desire for a gift card program to be started. “The initial reason for the program was that we heard from a lot of our businesses that a downtown gift card would be beneficial for them,” Potter told the newspaper, which chronicles events in the hometown of the University of Iowa. “We got almost weekly calls asking if there was a community gift card.”

    So far, only four people have signed up to get a card, which cost $1.50 to activate. But Potter said that her organization has yet to do any marketing and was unconcerned about the meager initial response. Still, Patrick Barron, a University of Iowa economics lecturer, told the newspaper he was skeptical about the program’s prospects. “Frankly, looking at it from a customer perspective, I don’t see why I would buy a card if I don’t get a discount or incentive.”

  • Prepaid Debit Cards And Obamacare

    Prepaid Debit Cards And Obamacare

    Pretty much nothing has been uncontroversial about President Barack Obama’s health care reform law. From screams about so-called “death panels” to complaints that the new law, known officially as the Affordable Care Act, doesn’t cover enough people, reasoned debate and compromise has been basically non-existent since well before the bill was even introduced to Congress.

    And even though Republicans in the House of Representatives have voted dozens of times to repeal the law and efforts are still continuing to de-fund it, the Obama administration is feverishly working to get the health exchanges it creates up and running. As part of that effort, according to reports in Businessweek Magazine and The Wall Street Journal, the White House issued rules in late Aug. that declare that prepaid debit cards can be used by citizens to pay for their new health care plans.

    According to the Businessweek story by John Tozzi, the state exchanges that will begin opening in Oct. will be required to accept payment via not only prepaid debit cards but also checks, money orders and bank wire transfers. In a way, this shouldn’t be at all surprising. After all, the Affordable Care Act is aimed largely at helping low-income families to purchase health care. Even though these new entrants to the health care market will be aided with government subsidies to help afford their new plans, they will still need a way to pay for it. For an estimated 10 million U.S. households lacking a bank account, a regular check is not an option. And according to a Vanderbilt University study cited in the Businessweek article, nearly 30% of those eligible for health care subsidies do not have bank accounts.

    Enter prepaid debit cards, a product that the federal government is already quite familiar and comfortable with. Indeed, tax refunds and a host of different government benefits can already be deposited to a prepaid debit card account. Still, there is likely to be criticism of the use of prepaid debit cards in this instance, since so many of them come with high fees. Then again, would anybody really expect this aspect of Obamacare to be less controversial than all the rest?

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Prepaid Debit Card Reviews, Complaints, Etc