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PREPAID CARD

1. If my prepaid card expires, do I lose my money?

If you have a prepaid debit card and the card expires while you still have money on it, you can request a replacement card to access the funds.

The funds on a gift card will be good for at least five years, even if the physical card expires at an earlier time. If your card expires and there are unspent funds on it that have not expired, the issuer may give you a replacement card or give you the money by another means, such as a check. Either way, they may not charge you a fee.

2. What is a prepaid card?

A prepaid card is a card that you use to access money you have loaded onto the card in advance.

There are different types of prepaid cards. With most cards, you can spend the money on the card for daily expenses or withdraw cash from an ATM. You can also choose to have your income directly deposited on most cards.

3. What is the difference between a prepaid card, a credit card, and a debit card?

Unlike a debit card, a prepaid card is not linked to a bank account. Generally, when you use a prepaid card, you are spending money that you have already loaded onto the card.

Prepaid cards vs. debit cards:

A prepaid card is very different from a bank account debit card. A bank account debit card is linked to your checking account. A prepaid card is not linked to a checking account. Instead, you are spending money you loaded onto the prepaid card in advance.

In most cases, you can’t spend more money than you have already loaded onto your prepaid card.  Overspending can occur with a checking account for some types of uses, and with a bank account debit card if you have “opted in” to your bank’s overdraft program. This means that your bank may charge you a fee for covering the cost of a purchase or ATM withdrawal that exceeds what you have in your account. Your bank will also require you to repay the overdraft.

In addition, right now prepaid cards may have fewer consumer protections than debit cards, such as those that apply if the card is lost, stolen, or other unauthorized charges appear. The CFPB has issued a rule requiring all prepaid cards to offer these protections.

Prepaid cards vs. credit cards:

Prepaid cards are very different from credit cards.  This can be confusing because both types of cards may have a card network logo like Visa, MasterCard, American Express, or Discover on them. When you use a credit card, you are borrowing money. Generally, when you use a prepaid card, you are spending money you loaded onto the card in advance

4. If my employer offers me a payroll card, do I have to accept it?

No. Your employer can’t require you to receive your wages on a payroll card. Your employer has to offer you at least one alternative.

Some employers will give you a choice between direct deposit to a payroll card, direct deposit into your bank account, or a paper check. Others may only give you a choice between the direct deposit to your own bank account or a prepaid card you choose, or a payroll card. Depending on the state you are in, your state’s laws say what choices your employer has to offer to you, or your state law might require that your employer get your written consent before paying you with a payroll card.

Your employer or the card issuer must provide you with the card’s terms and conditions. Before you agree to receive your wages on a payroll card, make sure you understand the card’s terms and fees. For example, some cards charge fees for ATM withdrawals, receiving paper statements, checking your account balance at an ATM, or using live customer service. Some cards charge fees every time you make a purchase, or charge an “inactivity fee” for not using your card.

5. Is the money on my prepaid card FDIC-insured?

Whether the money on your prepaid card is insured by the FDIC in the event of a failure of the bank that holds your card funds depends on how the card program is set up.

For individual bank accounts, if your bank goes out of business, the government guarantees you will get back up to $250,000 of the money in your individual bank account through FDIC insurance. There is similar insurance coverage for credit union accounts (called NCUA or NCUSIF insurance).

Funds loaded onto prepaid cards are typically held in pooled (not individual) accounts at banks or credit unions. Pooled accounts may qualify for FDIC or NCUA pass-through insurance if they meet certain requirements. Among other things, in order for your funds to be insured, the bank must have information that identifies you on file. Your cardholder agreement may indicate whether your card is eligible for pass-through insurance.

6. Are there any fees to use a payroll card?

Your employer makes the arrangements with the financial institution for the terms of the payroll card, including any fees that may be charged to you. Some employers arrange for payroll cards that do not charge you a monthly fee, but there may be other fees associated with using the card, so read the terms and conditions provided to you before you sign up.

In some states, you can’t be charged a fee to get your pay, which means that you won’t be charged a monthly fee to have a payroll card or for the first withdrawal per pay period, which can include all of your pay.

7. What is a health savings account card?

Your employer may offer a flexible spending account (FSA) or a health savings account (HSA) that lets you set aside money from your paycheck to go to a special account to pay for eligible medical expenses. The accounts may be linked to a prepaid card, and the rules on what type of spending is allowed for these accounts also apply to the use of the card.