According to the Consumer Financial Protection Bureau (CFPB), the use of prepaid cards in the past few years has exploded. In 2012, $65 billion have been uploaded to the accounts of prepaid cards, whereas, by 2018 the experts expected that the amount will spike to $112 billion.
Prepaid cards much look alike credit and debit cards, but have gained much popularity among young people in the past few years. It is safe, easy to use, cheaper than holding credit cards high-interest rates and overdraft fees,
Prepaid cards are less expensive to maintain and that’s the reason they are banks favourite too. The CFPB recently announced new prepaid card rules that will soon be implemented in Oct 2017. Here’s a snapshot of some upcoming changes in the use of prepaid cards.
Stephen Lesavich, the founder and lawyer of the law firm named by the Lesavich High-Tech Law Group, reports. “[This is a] major improvement over the use of prepaid cards is that starting October 1, 2017. Users will be provided with more paperwork in [easy-to-understand diction] with relevant disclosures, including fees.”
He further added, “Under the current system, many lost their money on account of prepaid card fees … they [weren’t] aware of, but the upcoming regulation will be more transparent in respect of fees and charges.”
Lost Money Protection
In the upcoming 2017 regulation, suppose if you lost $1,000 in prepaid cards somewhere, you will be able to recover most of it. Andrea Luquetta, a Deputy director of the California Reinvestment Coalition (CRC) says, “These changes are a good start.” But further points out that the consumers won’t be required to have the Federal Deposit Insurance Corporation (FDIC insurance).
More Overdraft protection
Many users spend more than they have on their account and that gave rise to the burden of overdraft fees. But most prepaid cards don’t allow consumers to cross their spending limit, allowing them to spend with ease, knowing that if they aren’t keeping track of their spending (which they should) they won’t be charged an overdraft fee.
Critics added, “Allowing consumers to bear the overdraft burden is something like offering them short-term loans which could be beneficial if they are in a financial jam.”
In either case, the CFPD is considering to limit the overdraft fees in upcoming regulations.
Most prepaid cards offer activation fees, an inactivity fee, a point of sale fee, ATM fees, a customer service fee, card replacement fees, upload fees, online bill pay fees …
You could choose not to have prepaid cards with the above fees burdens. Next fall, the upcoming regulation requires card companies to send a detailed monthly statement to each consumer so that they could know how consistently they are being burdened with perplexing charges.
Low Debt Trap
People often use prepaid cards to avoid debt trap but Lesavich says, that’s not the case with everyone. Many card issuers have stumbled into high overdraft traps with the use of their prepaid cards. Their failure to pay overdraft fees on time accrue more debt burden on them. But new rules will make it easier for them. Before prepaid card companies offer to spend more over the card limit, a background check of each consumer will be made to check his ability to accrue future overdraft debt burden.
Prepaid cards are marketed as a beneficial tool to avoid getting into the debt trap. In a year improvement, they may actually reach up to that promise. To keep yourself more updated about prepaid cards latest news, visit United Counselors blog section regularly.