Prepaid Debit Card Reviews, Complaints, Etc

Author: Curtis Arnold

  • Should You Put Your Tax Refund On A Prepaid Card?

    Should You Put Your Tax Refund On A Prepaid Card?

    By Curtis Arnold and Lucy Lazarony

    All the major tax preparation companies give you this option, but does it make financial sense?  Here’s a look at the pros and cons of receiving a tax refund via prepaid cards with direct deposit.

    Fast access to your tax refund. Need a faster tax refund?  E-filing your return and requesting a tax refund be sent to a prepaid card with direct deposit or a bank account is the fastest way to go, according to the IRS website. The IRS is issuing refunds to taxpayers in as few as 10 days for those who e-file and opt to receive their tax refund by direct deposit.

    “Direct deposit is typically better,” says David Newville, senior policy analyst at the Center for Financial Services Innovation. “You’re going to get it quicker and it’s going to be more secure than a check.”

    Pocket that tax refund, pronto! (Photo credit: Tax Credits)

    Keep tax refund money separate from other accounts. Have a special project in mind for that tax refund but worried the money will disappear quickly amid your day-to-day spending? Putting a tax refund on a prepaid card will keep the money separate from your other accounts.

    “You might not want to dump it into a bank account because it might get lost in day-to-day charges,” says Ben Jackson, a senior analyst at the Mercator Advisory Group.

    Watch out for fees. The biggest downside to receiving your express tax refund on a prepaid card is the assortment of fees associated with prepaid cards.

    Joe Ridout, a spokesman for Consumer Action, a San Francisco-based consumer advocacy group, sees no advantage to receiving a tax refund on a prepaid card, especially for people with bank accounts who could simply opt to receive a direct deposit of their tax refund into a checking or savings account.

    “If you have a bank account, there’s no advantage whatsoever to getting your tax refund on a prepaid card,” Ridout says. “You needlessly would forfeit some of your tax refund with the fees that come with these cards.”

    Ridout added that prepaid cards may be appealing to consumers without bank accounts but the fees associated with prepaid cards can make them a costly choice. “The best money saving solution for consumers is to open a bank account,” Ridout says. “Because these cards are a solution that will cost you money.”

    Still, opening a bank account may simply not be possible for some people. And while it is certainly true that far too many prepaid cards charge fees that don’t make a speedy refund a wise choice, there are some exceptions. Shane Tripcony, of BestPrepaidDebitCards.com commented, “Typically, bank accounts such as free checking accounts are cheaper to operate, but for some people, the built-in limitations such as no overdraft fees make prepaid debit cards a viable alternative.  As fewer banks are offering free checking accounts, the prepaid card option becomes a good choice, despite differences in fees.  It is all in how you will use the account.”

    In fact, if you are considering a prepaid card for your tax refund, here are some low-fee options that will take the smallest bite out of your money.

    Serve from American Express . There simply aren’t many fees associated with Serve, American Express’s consumer-friendly prepaid debit card. There’s no activation fee, it’s easy to dodge the $1 monthly account charge and, importantly, cash withdrawals from MoneyPass ATMs are also free. It’s easy to get your federal tax refund sent quickly to your Serve account and, yes, there’s no charge.

    U.S. Bank Convenient Cash Card. Another good option, particularly if you live in an area with plenty of U.S. Bank ATMs, is the U.S. Bank Convenient Cash Card. Like most prepaid debit cards, it’s a snap to get your tax refund loaded for free onto a U.S. Bank Cash Card. But what sets it apart from other options is that cash withdrawals from U.S. Bank ATMs are free, as are direct deposit and bill pay.

    Chase Liquid. With 5,500 Chase branches nationwide, it’s easy to withdraw the tax refund you get loaded onto the Chase Liquid prepaid card without incurring an unwanted ATM charge. For a $4.95 monthly account charge, Chase Liquid makes it simple to avoid a long list of other fees as well.  It makes the card a worthy option for receiving a quick, relatively fee-free tax refund.

    But remember, because fees on prepaid cards vary so widely, it’s important to study the terms and conditions on prepaid cards carefully before signing up for one.

  • Target Speeds Move to EMV Cards

    Target Speeds Move to EMV Cards

    Target has vowed to do what it can to speed the US’s transition to more secure payment card technology.

    In testimony before the Senate Judiciary Committee, Target Chief Financial Officer, John Mulligan, said that one of the company’s responses to the massive data breach that impacted tens of millions of its customers in late 2013 would be to equip all 1,800 of its U.S. stores with card readers able to process EMV card transactions by the beginning of 2015. The new timeline announced by Mulligan is over six months earlier than Target’s previously stated goal for implementing smart card technology in its stores. EMV cards, also known as smart cards, are considered far more difficult for hackers to compromise than the magnetic stripe technology currently used by most credit and debit cards.

    Additionally, Mulligan told lawmakers that Target’s own REDcards will also transition entirely to EMV technology. “Updating payment card technology and strengthening protections for American consumers is a shared responsibility and requires a collective and coordinated response,” Mulligan said. “On behalf of Target, I am committing that we will be an active part of that solution.”

    Target is undoubtedly motivated to speed up its move to EMV technology by the avalanche of negative attention and subsequent hit to its profits caused by the data theft. Still, most security experts believe it’s the right move. EMV technology is a far tougher nut for data thieves to crack than magnetic strip technology, which has long been the security norm in the U.S. Because EMV cards contain a microchip that must be authenticated with a personal identification number – hence the technology’s other name, chip and PIN – they are far less vulnerable to identity fraudsters than magnetic swipes.

    In countries around Europe and throughout the globe, the fact that EMV cards are standard has reduced the amount of identity theft significantly. The replacement of magnetic strip technology with EMVs certainly won’t end data theft altogether. As Mulligan noted in his Senate testimony, Target cannot force the whole country to embrace EMVs. It will require broad support from other retailers and card issuers for all U.S. consumers to get the benefit of the elevated protection offered by EMV cards.

  • U.S. Government Urges Changes To Student Debit Cards

    U.S. Government Urges Changes To Student Debit Cards

    Debit cards and prepaid debit cards available to college students have plenty of room for improvement. That is the overriding conclusion of a recent report issued by the U.S. Government Accountability Office, or GAO, the investigative arm of the U.S. Congress.

    The GAO opted to scrutinize student debit cards because the number of universities and colleges that have entered into agreements with financial companies to provide these products has been on the rise recently. According to the GAO report, 852 schools, or about 11 percent of all U.S. universities and colleges, have inked deals to provide debit and prepaid debit cards to students.

    Not only have the number of agreements to provide student debit cards been on the rise recently, the GAO says that most of the cards currently available are used by schools to disburse financial aid and other funds. Some schools also utilize student debit cards as a form of identification.

    Government investigators cited a number of specific areas where cards could be more student-friendly, including in the realm of fees. Although the GAO discovered that fees associated with student debit and prepaid debit cards were comparable with other available products, there were some exceptions. In particular, some student debit cards levied a fee on students who made purchases using a personal identification number (PIN) instead of a signature. This is a fee most mainstream cards don’t impose, note the report’s authors.

    The GAO report also noted the potential problem of fee-free ATM access for the users of student debit cards. Although officials at nine of the schools surveyed by the GAO didn’t highlight any problems with the availability of fee-free campus ATMs, the report says that the lack of any specific guidelines regarding their availability could be problematic. Currently, the Department of Education requires that students receiving federal financial aid via a college card have “convenient access” to ATMs that do not charge fees, although there is no exact definition of what constitutes convenient.

    The other major finding by the GAO regarded whether or not schools were encouraging students to obtain a card from a particular provider. In some cases, colleges have been pushing certain student debit cards rather than providing objective information about various products. The GAO report speculates that this may be due to financial incentives schools receive based on how many students sign up. The report also found that contracts between the financial institutions providing student debit cards and the schools were not publicly available.

    To counteract what it sees in the current arrangement between schools and debit and prepaid debit card providers, the GAO has several specific recommendations. To improve transparency, it suggests that Congress require that agreements between schools and financial institutions be filed with the Consumer Financial Protection Bureau (CPFB) and be made available to the public. Additionally, the GAO urges the Department of Education to ensure that any school utilizing student debit cards to deliver federal financial aid make available objective information about payment options available to students. Additionally, the GAO suggests the Department of Education better define what “convenient access” to fee-free ATMs means.

     

     

     

     

     

     

     

     

  • For Prepaid Cards, Choose EMV Chip Cards, A Smart Card All Around

    For Prepaid Cards, Choose EMV Chip Cards, A Smart Card All Around

    By Curtis Arnold

    Besides the thieves themselves, the main culprit to emerge from the recent heist of personal information from over 100 million Target and Neiman Marcus shoppers isn’t human at all. Rather, the unlikely villain is a decades old piece of technology known simply as the magstripe, or magnetic stripe, that graces the backs of billions of credit, debit and prepaid debit cards carried by Americans in their pocketbooks and wallets everyday.

    But, there is an alternative on the way, the EMV chip card.

    In a way that not even the most well crafted editorials or investigative journalism series could have accomplished, the collective anger spawned by millions of consumers has focused a spotlight on the inability of magnetic stripe technology to safeguard the critical account and personal data it contains. “Basically, the magnetic strip contains all the data needed for credit card fraud,” says Lamar Bailey, Director of Security Research for Tripwire, a data security firm that works with companies like Visa, MasterCard and Safeway. “Unfortunately, these strips are very easy to read and duplicate and are a favorite target for a wide variety of financial fraud.”

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    [button link=”#Comments” variation=”darkgrey”]We want your opinion![/button]  What do you think of the recent security breaches?  How safe do you feel your personal data is currently?  What are your main concerns about using credit, debit or prepaid cards?  We want to hear from you!  Just add in your thoughts in the Comments section below!
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    As difficult as the lesson has been to learn, there is now a more widespread understanding of the need to quickly embrace so-called smart cards. Also known as EMV or chip and PIN cards, they have been the standard in Europe for years and offer far greater identity protection than magnetic strips. Introduced in the 1990s in Europe, these so-called EMV cards take their name from Europay/MasterCard/Visa. As Robert Siciliano, the CEO of IDTheftSecurity.com, explains it, EMV chip cards contain an embedded microchip that is authenticated using a personal identification number, or PIN. “When a customer uses a smart card to make a purchase, the card is placed into a PIN pad terminal or a modified swipe-card reader, which accesses the card’s microchip and verifies the card’s authenticity. The customer then enters a four digit PIN, which is checked against the PIN stored on the card.”

    This is another way of saying that smart cards are a tougher nut for identity thieves to crack – and a good explanation as to why global cyber criminals have set their sights on the U.S. It also means that, whenever possible, American consumers should choose a payment card that offers EMV chip protection. This is particularly true for the growing number of Americans who utilize prepaid debit cards.

    While it’s true that the prepaid debit card industry has been exploding recently – Mercator Advisory Groups reports that Americans loaded $192 billion onto prepaid cards in 2012 – the mainstreaming of a product once favored primarily by those who couldn’t get bank accounts or credit cards has not yet been accompanied by stronger consumer protections. For instance, if a credit card is lost or stolen, federal law limits consumer liability to just $50, although most major card issuers offer zero liability. Federal law also protects debit cards, although limiting liability depends on a consumer quickly reporting a card lost or stolen. By sharp contrast, prepaid debit cards do not have blanket protection. The terms and conditions vary depending on the card issuer, with some being quite good and others nonexistent.

    Because of that lack of protection, prepaid debit card users concerned about fraud can avoid having their accounts cleaned out by getting an EMV chip card. Unfortunately, these smart cards are not available everywhere – not even close. Some card issuers, such as the Members 1st Federal Credit Union, do offer EMV chip reloadable prepaid cards. But as is the case with most debit and credit cards, a smart card option is not yet available. “EMV has not been popular in the US because of the high cost of replacing all the credit card readers and millions of credit cards,” says Lamar Bailey of Tripwire.

    What can change that? For many credit and debit card issuers, the change is underway and expected to be complete by 2017. A combination of public pressure, regulation and simple self-interest could prompt the same move by prepaid card providers. “The technology in a magnetic stripe card has been hacked and decimated,” says Siciliano of IDTheftSecurity.com. “EMV for prepaid cards would bring them to the same security standard as credit and debit cards and more than likely open up a new market for card providers.”

    Photo Information below.

    Caption:  By 2017, look for embedded security chips to be present in all US credit and debit cards. (Photo credit: Wikipedia)

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    [button link=”#Comments” variation=”darkgrey”]We want your opinion! [/button] What do you think of the recent security breaches?  How safe do you feel your personal data is currently?  What are your main concerns about using credit, debit or prepaid cards?  We want to hear from you!  Just add in your thoughts in the Comments section below!
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  • Beware The Prepaid Debit Card Trojan Horse

    Beware The Prepaid Debit Card Trojan Horse

    The use of prepaid debit cards for tax refunds hurts the poorest citizens 

    by Curtis Arnold

    It’s a cliché, but it bears remembering: if something sounds too good to be true, it probably is. And to be sure, the prepaid debit card industry has a long and ongoing legacy of hyperbole, with card issuers saying plenty about the ease and convenience of their plastic products and precious little about often-predatory fees.

    Obviously, it’s no surprise whatsoever to see companies with wares to hawk ignore or downplay the perils of prepaid debit cards and instead tout their benefits. But increasingly it is presumably impartial and consumer-oriented governments that are extolling the wisdom of using prepaid debit cards to deliver tax refunds to the millions of Americans – 17 million adults, or 8 percent of all U.S. households, by the Federal Deposit Insurance Corporation’s (FDIC) latest tally – who lack bank accounts and can’t take advantage of direct deposit.

    The arguments government officials in states like Oklahoma, Connecticut and Virginia make in favor of utilizing prepaid debit cards to deliver tax refunds to so-called unbanked citizens sound persuasive. For the citizens themselves, receiving a refund via a prepaid debit card instead of a paper check means they’ll get their money weeks faster than if they had to wait for snail mail. Speed is no small matter for many low-income Americans who use their refunds to pay off high-interest payday loans that they may be forced to take while waiting for a check from the U.S. Treasury.

    The governments themselves also insist that prepaid debit cards are a boon to all taxpayers. The crux of the argument is that cash-strapped governments can garner big savings by delivering refunds electronically with prepaid cards instead of printing and mailing physical checks. At least one study reported that it cost nearly $1 more to mail a check than to deliver an electronic payment.

    In this era of belt-tightening austerity, that sort of taxpayer-saving government efficiency is to be cheered, right? Not exactly. Persuasive new research by John Friedman, an assistant professor of public policy at the Harvard Kennedy School, dismantles the deceptively alluring argument that tax refunds delivered on prepaid debit cards are good for everyone. In an article at Bloomberg Law, Friedman concedes that state governments can trim their own costs by switching from paper checks to prepaid debit cards. But the problem is that many of the hefty fees associated with prepaid debit cards – such as an account set-up charge and fees for taking money out of an ATM – are pushed off on to the taxpayers receiving the refunds. In his research, Friedman cites data from the now discontinued federal tax refund program in which taxpayers received money on a MyAccountCard. Recipients of refunds on that particular prepaid debit card paid an average of $19 during the first six months of use, an amount far and above the $1 governments save.

    What is particularly troubling about this rush towards offering – and sometimes actually mandating – those who don’t have bank accounts receive their refunds on prepaid debit cards is who is being impacted. Unbanked Americans are typically poor. Forcing the poorest among us to shoulder what amounts to a minimal government cost savings sounds too bad to be true. Unfortunately, it increasingly is.

Prepaid Debit Card Reviews, Complaints, Etc