After years of bashing prepaid cards, Consumer Reports now says that they are a good way to pay, and is taking credit for changes in the industry. Although prepaid cards have long been a good financial tool for people, Consumer Reports has come around to recognizing how they can help people manage budgets and avoid debts while having the ability to spend funds as they would with any other kind of card.
Not that long ago, prepaid cards were a fee-laden payment method of last resort for people without credit cards or bank accounts. In fact, in 2010, we did not recommend them because of their high fees and inadequate consumer protections. But now, thanks in part to advocacy work by Consumer Reports and other consumer groups, many of the cards have affordable fees (or none at all) and voluntarily offer the same consumer protections as debit cards, including Federal Deposit Insurance Corp. coverage on balances and no liability if they’re lost or stolen.
Prepaid cards have had FDIC insurance protection specifically spelled out for cardholders since 2008, and network and issuer protections have extended to prepaid card holders since they were created. Fees structures have varied from card program to card program, but that is like any product.
Despite the dim view of prepaid’s past, the article may help change the public perception of prepaid cards. Providers should consider using it where it makes sense in their efforts to communicate the value of prepaid cards for cardholders.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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