April 12, 2014
Tips for Managing the Prepaid Cards
Prepaid cards are becoming a popular alternative to traditional checking accounts for many older adults because they can be cheap and easy to use. But be aware of fees and downsides. Each card has a different policy, so it's important to do your research so you can better manage and protect your money.
Prepaid cards are loaded with money in advance from different sources. Generally, you cannot spend more than the amount on the card. With help from Bank of America and Money Management International, the National Council on Aging developed the following tips on how to use, manage and protect your government-issued and commercial prepaid debit cards.
Government Benefits Cards
Federal government-issued cards, such as Direct Express®, were developed exclusively for people who receive federal benefits, such as Social Security or veterans benefits. Be sure to:
These include electronic benefits transfer (EBT) cards, which are state-issued government benefits cards (such as SNAP/food stamps, TANF); commercial prepaid debit cards, which typically carry a network logo (Visa, MasterCard, American Express or Discover) and look like a normal credit or debit card; and gift cards from retail stores, which have a fixed amount and cannot be re-loaded with more money. For any of these cards:
- Look closely at the fee summary so you know which fees to avoid when possible.
- Use an ATM in the Direct Express® card network, where your first withdrawal is free and later withdrawals have reduced fees.
- When you make a purchase using your PIN number at grocery stores and many other places, you have the option to get cash back for free.
- You can go to any bank or credit union that displays the MasterCard acceptance mark and get cash from a teller free-of-charge.
- Consider using as an alternative to a checking account. Prepaid cards can sometimes be cheaper and easier than traditional bank or credit union accounts.
- Make sure you know the fees and costs of prepaid cards, and comparison shop cards as you would any purchase.
- Be aware that prepaid card providers generally don't check your credit.
- Check your card agreement to see what fees apply. At some stores, when you pay with a prepaid debit card, you may have the option to choose whether to run the card as credit or debit. Some prepaid cards charge you a higher fee if you choose debit, so check your card agreement to find out what your card's fees are. Either way the money will come out of your prepaid card account.
- Contact the card provider immediately if your card or PIN is lost or stolen. Your rights to recover money taken from your prepaid card account depend on what type of card it is, what your contract promises and how quickly you report the loss after you discover it. Generally, payroll cards and government benefits cards are protected under the same rules that protect your bank debit card. The federal Direct Express® card provides similar protections by contract. Network-branded (MasterCard or Visa) prepaid debit cards usually give some protection, but you should check your card provider's website to find out the specifics. If the card that was lost or stolen was a gift card for just one store or retail group, your ability to recover any money will depend on the retailer's policies and on whether you registered the card.
- Don't use prepaid cards for gas, hotels or rental cars because sometimes you will get an additional charge, called a temporary hold. Because your purchase may take a few days to process, the temporary hold ensures you have enough money to pay for it. Once the transaction is processed, the hold will be removed and you will be able to use the rest of the money on your card. But while the transaction is being processed, you may not have access to more funds than the purchase for a period of time.
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