Prepaid Debit Cards

prepaid debit card
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General purpose reloadable (GPR) prepaid cards, also called GPR prepaid accounts, are a versatile financial tool for consumers. They can be loaded via direct deposit or with cash, and used at ATMs to withdraw funds and at merchants to make point-of-sale purchases, similar to debit cards tied to checking accounts. They can also be used to budget or control spending.

In its 2013 national survey, the Federal Deposit Insurance Corp. (FDIC) found
that 8% of U.S. households were “unbanked,” meaning they did not have a bank account—and of those, 22% had used GPR prepaid cards in the previous 12 months. By comparison, the survey found that only 5% of those with a bank account had used these cards.1 Especially for the unbanked, the cards often serve as a primary transaction account.

Problems:

Due to loopholes in the predatory to0-big-to-fail banking system as well as wage stagnation for the last three decades, families have recently turned to prepaid debit cards as a means to manage their daily finances. Unfortunately, there is just as many predatory loopholes and hidden fees in the prepaid debit card industry.

Recently, private employers and state governments have turned to payroll cards as a way to save money instead of printing checks or in case employees don’t have bank accounts. Although there may be more regulations for payroll cards than general pre-paid debit cards, there is still predatory banking by some employers and payroll card companies.

Solutions for prepaid debit and payroll cards:

  • Limit purchase price to $5
  • Limit reloading charge to $1 per transaction
  • Limit monthly fee to $1
  • Limit overdraft fee to $10
  • Opt out provision for over draft protection
  • Make ATM balance inquiries free
  • Prohibit fees for in-network deposits
  • 2 free out-of-network deposits per month, then $1
  • Prohibit legal processing fees
  • Prohibit inactivity fees
  • Require all fees to be visible and on the outside of packaging
  • Require pre-paid issuers pool funds into FDIC insured banks within 24 hours of a deposit
  • Close Electronic Fund Transfer Act loopholes for Regulation E
  • Strengthen liability coverage for stolen cards, lost cards, transaction errors, fraud and mis-charges
  • Issuer must provide 30 days notice to any policy changes and fees
  •  The first three telephone calls to a live customer service representative per pay month
  • No fees for the application, initiation, loading, participation or other fee to receive wages or to hold the card (Payroll-Model-Law)

 

Federal Reserve Bank of Philadelphia – The Scope of Regulation E Now Covers Payroll Cards

Wikipedia – Electronic Fund Transfer Act

Truth Out – Six Ways the Big Banks Are Getting Back-Door Bailouts

Truth out – Overdrawn and Overworked: How Banks Are (Still) Screwing Consumers With Overdraft Fees

Truth out – McDonalds Tells Workers to Toil 70 Hours a Week, Use Ripoff Payroll Cards as Part of “Financial Literacy”

NBC – The truth behind Suze Orman’s new debit card

CBS – Don’t get burned by prepaid debit card fees

Huffington Post – Debunking Myths Surrounding Reloadable Prepaid Cards

Huffington Post – Prepaid Cards Double As Student IDs On College Campuses

Huffington Post – Why Prepaid Cards and Gift Cards Are Not the Same

The Guardian – RushCard disruption reveals why prepaid debit cards should not exist at all

Slate – Why We Should Be Talking About Russell Simmons’ RushCard Fiasco

Slate – Facing public outrage, the Kardashians cancel their especially sleazy prepaid debit card.

Pew – Pew: Consumers Without Banks Use Prepaid Cards Like Checking Accounts

Pew – Survey of motivations and views of prepaid card users

Pew – Prepaid Accounts Under the Electronic Fund Transfer Act

Pew urges CFPB to finalize prepaid card rule

Pew – What Do Consumers Without Bank Accounts Think About Mobile Payments?

PR Newswire – Pew: Consumers Without Banks Use Prepaid Cards Like Checking Accounts

Salon – Pre-paid card users, under scrutiny, find tax refunds frozen

Salon – Worst rip-off since banking fees: Behold an infuriating money-sapping scheme

New York Times – Prepaid Debit Cards May Augment Bank Accounts

New York Times – Paid via Card, Workers Feel Sting of Fees

New York Times – Workers Paid by Card Will Gain Protections in New York State

Consumer Financial Protection Bureau – CFPB Proposes Strong Federal Protections for Prepaid Products

Consumer Financial Protection Bureau – What is the difference between a debit card and a prepaid debit card?

US PIRG – Banks Skim Millions in Fees from Student Aid Using Debit-Card-Linked Student ID’s

US PIRG – U.S. PIRG Urges Further Action on Campus Debit Cards

USA Today – Feds: Employers can’t force payroll debit cards on workers

National Law Review – Illinois Governor Signs Payroll Card Law

National Law Review – Payroll Debit Cards Could be Costly to Employers

Common Dreams – New Report Reveals Payroll Cards’ High Costs to Low Wage Workers

State payroll-card fees hit low-wage workers hardest

Think Progress – How A Giant Restaurant Conglomerate Teamed Up With Banks To Stiff Its Workers

Think Progress – After Ruling That McDonald’s Can’t Pay Workers In Bank Cards, The Bank Pays Up

Forbes – Are Hourly Workers Being Short-Changed? The Truth About Payroll Cards

Crain’s – Payroll-card rules should meet check-cashers’ standards

Center for American Progress – The End of Cash: The Rise of Prepaid Cards, Their Potential, and Their Pitfalls

Eater – Are Payroll Cards Too Costly for Restaurant Employees?

McDonald’s Payroll Cards Broke Pa. Wage Law, Judge Says

Gothamist – Workers Who Get Paid With Debit Cards May Get Screwed A Little Less

Reuters – N.Y. attorney general probes payroll cards over fees

Chicago Tribune – Governor of Illinois signs payroll cards bill into law

Roosevelt Institute – Employers and Banks Bilk Workers with Payroll Cards

Social Science Research Network – Making Prepaid Safe for Consumers: A Framework for Providing Deposit Insurance and Regulation E Protections

The Street – Consumers Warned of Hidden Fees Lurking in Prepaid Debit Cards

Hartford Business Journal – Connecticut Governor signs payroll card bill

Connecticut Authorizes Use of Payroll Cards to Pay Employees

The Nation – The Financial Firm That Cornered the Market on Jails