Credit and Debit Card Ratings

Pew: Best Prepaid Cards More Affordable Than Checking Accounts

It’s a classic good news, bad news scenario. According to research issued last week by the Pew Charitable Trusts, the best prepaid cards available on the market are often a more affordable option than basic checking accounts. Still, while prepaid cardholders are generally in a far better position than they were when Pew’s last survey of prepaid cards was released two years ago, the organization’s researchers have no lack of recommendations about how various rules and regulations could improve things for consumers.

The report, titled “Consumers Continue to Load Up on Prepaid Cards,” examined the disclosures and fee structures of 66 prepaid cards. In general, Pew found that as the market for prepaid cards has expanded – U.S. consumers loaded $64 billion onto prepaid debit cards in 2012, more than double the amount loaded in 2009 – it has also matured in a way that is beneficial to consumers. “More consumers are turning to prepaid cards as a convenient tool to control spending and fees,” says Susan Weinstock, who directs Pew’s safe checking research.

In large part, that improvement is due to the fact that prepaid cardholders are now an attractive market for large financial institutions. Indeed, the 10 largest prepaid cards are now offered by banks compared to zero in 2012. As a result, the report finds the best prepaid cards are now often lower cost than checking accounts offered by large financial institutions.

Other improvements for prepaid cardholders noted by the study’s authors include much better disclosure. For instance, nearly all of the cardholder agreements examined by Pew included language explicitly stating that customer funds would be covered by Federal Deposit Insurance Corporation (FDIC) insurance. Even when FDIC insurance was not included, some cardholder agreements explicitly said so. Another move in the right direction, according to Pew, is that prepaid cardholder agreements now increasingly include arbitration agreements that allow customers to settle disputes with prepaid card issuers via a private third party decision maker.

But not everything is rosy for prepaid cardholders. Among the report’s other findings is that prepaid cards do not offer consumers the same limited liability projection that federal law mandates for checking accounts. Pew also has a laundry list of recommendations to improve prepaid cards, including the elimination of overdraft protection, protection from liability for unauthorized charges and federal insurance for fund losses due to the failure of a financial institution.

“While prepaid cards offer many benefits to consumers, they are a relatively new product with little oversight,” says Weinstock. “A lack of protections undermines prepaid cards as a safe and easy way to manage money.”

 

 

 

Author: Chris Warren

  • Pew: Best Prepaid Cards More Affordable Than Checking Accounts

    Pew: Best Prepaid Cards More Affordable Than Checking Accounts

    It’s a classic good news, bad news scenario. According to research issued last week by the Pew Charitable Trusts, the best prepaid cards available on the market are often a more affordable option than basic checking accounts. Still, while prepaid cardholders are generally in a far better position than they were when Pew’s last survey of prepaid cards was released two years ago, the organization’s researchers have no lack of recommendations about how various rules and regulations could improve things for consumers.

    The report, titled “Consumers Continue to Load Up on Prepaid Cards,” examined the disclosures and fee structures of 66 prepaid cards. In general, Pew found that as the market for prepaid cards has expanded – U.S. consumers loaded $64 billion onto prepaid debit cards in 2012, more than double the amount loaded in 2009 – it has also matured in a way that is beneficial to consumers. “More consumers are turning to prepaid cards as a convenient tool to control spending and fees,” says Susan Weinstock, who directs Pew’s safe checking research.

    In large part, that improvement is due to the fact that prepaid cardholders are now an attractive market for large financial institutions. Indeed, the 10 largest prepaid cards are now offered by banks compared to zero in 2012. As a result, the report finds the best prepaid cards are now often lower cost than checking accounts offered by large financial institutions.

    Other improvements for prepaid cardholders noted by the study’s authors include much better disclosure. For instance, nearly all of the cardholder agreements examined by Pew included language explicitly stating that customer funds would be covered by Federal Deposit Insurance Corporation (FDIC) insurance. Even when FDIC insurance was not included, some cardholder agreements explicitly said so. Another move in the right direction, according to Pew, is that prepaid cardholder agreements now increasingly include arbitration agreements that allow customers to settle disputes with prepaid card issuers via a private third party decision maker.

    But not everything is rosy for prepaid cardholders. Among the report’s other findings is that prepaid cards do not offer consumers the same limited liability projection that federal law mandates for checking accounts. Pew also has a laundry list of recommendations to improve prepaid cards, including the elimination of overdraft protection, protection from liability for unauthorized charges and federal insurance for fund losses due to the failure of a financial institution.

    “While prepaid cards offer many benefits to consumers, they are a relatively new product with little oversight,” says Weinstock. “A lack of protections undermines prepaid cards as a safe and easy way to manage money.”

     

     

     

  • Target Data Breach Spawns Consumer Advisory

    Target Data Breach Spawns Consumer Advisory

    The now infamous Target data breach continues to have ripple effects. On January 27th, the Consumer Financial Protection Bureau (CFPB) issued a consumer advisory with tips on what to do if someone suspects they are a victim of what seems to be multiplying payment card data breaches.

    There’s no doubt that the Target data breach spawned this consumer advisory from the federal agency charged with protecting Americans from financially related fraud and abuse. In explaining why the consumer advisory was issued, Consumer Financial Protection Bureau head, Richard Courdray, noted that payment cards include information that can be misused by criminals. “Consumer financial products often involve significant amounts of consumer data,” he says. “In light of recent data breaches, we want to be sure that consumers know how to protect themselves and where to turn if they do suspect fraud.”

    According to the Consumer Financial Protection Bureau’s advisory, there are a number of steps people can take to protect their accounts in case of a payment card data breach. As a start, it helps to stay current with the news. In the wake of the Target data breach that spawned this particular consumer advisory, other potential payment card data breaches have come to light at retailers like Michaels Stores and Neiman Marcus. Knowing that you are a potential victim of a payment card data breach alerts you to the need to keep a close eye on your accounts. If there are any suspicious charges, the consumer advisory suggests reporting it immediately to your bank or card provider.

    The Consumer Financial Protection Bureau advises taking advantage of online or mobile account monitoring in order to catch any suspicious transactions quickly. “The sooner you tell your provider about any unauthorized debits or charges, the better,” says the consumer advisory. The advisory also urges consumers interested in protecting their accounts to keep an eye on transactions for months after any potential data breach. Unauthorized charges may not begin showing up for a long time. The Consumer Financial Protection Bureau also says to report any suspicious charges, even when the amount charged is very small. Sometimes criminals test an account to see if a small charge will go through before making larger purchases.

    If you do notice a charge you didn’t make, the Consumer Financial Protection Bureau suggests different responses depending on the type of card. For credit and debit cards, the advice is simple: cancel the card and, for a debit card, consider changing your PIN when you get a replacement. For prepaid debit cards, the Consumer Financial Protection Bureau says it’s best to check with the card provider about the best way to dispute charges. “Your rights vary depending on the type of card,” says the consumer advisory.

    The consumer advisory also urges anyone who notices a fraudulent transaction to immediately call the card provider’s toll-free customer service number rather than waiting to submit something in writing. Once you do actually write a letter detailing the facts of your case, be sure to keep a copy of the correspondence for your records.

    Finally, the Consumer Financial Protection Bureau says to report any problems with how your card provider responds to your concerns. “Card providers should investigate the charges and respond quickly – generally within 10 business days of receiving an error notice for debit card disputes or within two billing cycles for credit card disputes,” says the consumer advisory. “You have a right to know the results of the investigation.” Problems with a card provider’s response can be submitted at www.consumerfinance.gov/complaint.

     

     

     

     

     

     

     

Credit and Debit Card Ratings