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The funds on the prepaid debit card can be accessed just like regular debit cards: Cash withdrawals at an ATM, purchases at a local or online store, or for paying bills online or by phone.
The prepaid debit cards can substitute for a checking account for a person who doesn't have a bank account. The fees for the debit card are higher than a regular bank account. Some prepaid debit cards have lower fees than others. The prepaid debit cards fees may be lower than the alternative of paying check cashing fees, and fees for money orders or bill paying services. Also, the prepaid cards cannot be overdrawn, so there is no possibility of excessive Non Sufficient Funds (NSF) charges.
All these prepaid debit cards have a bank behind them, but the customer doesn't deal directly with the bank. The customer's interactions are with a middleman, the card's issuer.
Suze Orman's prepaid debit card, which was highly publicized when first issued, is being discontinued as of 6/30/14, with apparently very little notice given to cardholders. When I read the New York Times article about the card's cancellation, I wondered if there was a possibility of some government action behind this closure, similar to the government's actions against the bank accounts of gun store owners and the bank accounts of porn stars.
Of course, there is the possibility of the closure of this Suze Orman's card being unique to this card. In my opinion, Suze overpromised the benefits of this card. She claimed using this card would improve credit records and FICO scores. Since this is a debit card, not a credit card, it doesn't seem possible to me that it could have an impact on a credit score.
Here is a link to the NY Times article.
http://www.nytimes.com/2014/06/17/business/suze-ormans-approved-prepaid-debit-cards-are-quietly-discontinued.html
However, the article posted above indicates there is indeed a government action behind this abrupt closure of the debit card.
I found an article from a Philadelphia newspaper about Bancorp's FDIC consent decree. It said the actions will restrict about one-third of Bancorp's prepaid-cards business.
Here is a link to the Philly.com article: http://www.philly.com/philly/blogs/inq-phillydeals/Bancorp-shares-plunge-on-FDIC-limits.html
Here is a link to the FDIC consent decree:
Read more at http://www.philly.com/philly/blogs/inq-phillydeals/Bancorp-shares-plunge-on-FDIC-limits.html#P1KVddFWcqCwCChq.99
Here is a link to the FDIC Consent Decree: http://www.snl.com/Cache/24005655.pdf?IID=4054569&FID=24005655&O=3&OSID=9
One time someone tapped into my account and purchased about $20 of software. Fortunately I caught it quickly and Apple refunded the money, but I really don't trust having portable devices or cell phones have access to a real credit card.
My debit card is linked to my checking account and each time I use it as a credit card my bank pays me 10 cents, this more than pays my checking account fees.
I hate paying for checks and taking the time to write each one out, I use checks only at church now so I will not temp someone to swipe the cash.
I wonder if this will effect my account? I don’t think it should but who knows what this bunch is really up to. So they are bottlenecking the porno stars bank accounts, one more dream dashed.
Just curious, why are these needed if people can get a checking account with a debit card?
I have great credit and love my chase MC personally, pay it off every month and they treat you like a king, gives me cash back.
I always laugh when I tell them to put it in my account and they tell me I cant use it as the minimum payment. I tease them about it.
It seems that anyone can get a credit card cant they? But some people cant handle one.
I wonder if this will affect gift cards? Any time we go out to eat, we get the gift cards at a grocery chain that gives us $12 worth of gas for every $100 we spend on gift cards.
It’s ridiculous that the government is making it increasingly difficult for people to conduct electronic commerce. All any additional rules will do is prey even further on the “underbanked” a/k/a poor people that for one reason or another do not have a bank account and widen the electronic gap between the rich and the poor.
These regulations will close down a market for others, that do not wish to enter the banking system, prefer to use cash and need some way to purchase products online.
Big Brother knows enough about Americans already. They need not collect more information on us if we choose to use a Prepaid Card to conduct business.
This is just the Regime working to keep the underbanked dependent on government. Why do they need credit cards? Let them use their EBT cards!
I don’t think I have ever seen a “prepaid” card. When in America I had AMEX and a regular MasrerCard. They were standard credit cards.
When I moved to Central Europe, the AMEX and MC/Visa had almost no acceptance except in hotels and other tourist venues.
In Slovakia, and now in the Philippines, my MasterCards, issued by my foreign banks, have been tied to my regular bank account. Whatever money that I have in my bank account is useable with my MasterCard, via ATM or in any store that takes cards. They are, in effect, debit cards. Credit cards are seldom available to foreigners.
I assumed the same would be common in the US.
So will California quit issuing them for unemployment?
Just keep the balance low and transfer money from your main checking account as needed.
Money laundering is a problem with these cards to be honest, it is the fastest and easiest way for a drug dealer to turn undeclared cash into electronic cash without a paper trail.
Talking with a friend what they REALLY want to go after is the prepaid cell phone minute cards and off the shelf phones that are unregistered. (burn phones) Bought with a prepaid credit card they are completely untraceable unless they can get video of the transaction, and even then it is usually a kid sent to buy them. You can get a cheap one now for about $5, plus a minute card that costs $.10/ minute, $.05/ text. For this chump change they have virtually unlimited use, and Big Brother doesn’t like that much these days.
Sounds to me like they’re going to drive people to electronic currencies such as bitcoin. Essentially no transaction fees.
I use a prepaid card every month to pay my few utility bills and an occasional internet purchase. Other than that its cash, my buying habits are no ones business. And yes, I do have a bank account, although I only use it to receive my direct deposit.
——All these prepaid debit cards have a bank behind them——
How about walmart?
Interesting date - I have seen a few articles (mostly obscure) that the Gubmint is instituting new cash-flow rules on 1 July. More controls coming as ever smaller amounts of cash are reported/monitored to 'prevent crime" while further putting government scrutiny and control in our lives.
Relentless.....
The prepaid gift card industry is very large. (I recently interviewed with a firm that supports the financial data transactions for such cards.) One canary falling might not mean much if the cage in the mine has 10,000 of them. I think FDIC wants to make it more difficult for them to be used in money laundering. More bureaucratic overhead, perhaps government backdoors. But not to extinguish the concept altogether. That would unleash an enormous lobbying backlash.
For those who are unfamiliar, they are similar to a prepaid card but they are provided by employers through a pay card provider (and even payroll services like ADP and Ceridian offer them) as an alternative to traditional direct deposit into a bank account. Many employers, like my company either mandate direct deposit as a condition of employment (where allowed by state law) or for those who are “unbanked” they deposit the pay to a Pay Card. A Pay Card looks just like a credit or debit card and typically has a VISA or MasterCard logo on it.
But unlike pre-paid cards, there are restrictions on them as to the fees that can be charged. DOL regs state that you as the employer cannot deduct a fee or charge an employee a fee for getting paid. So Pay Cards typically allow at least one cash withdraw and or transfer to another account or the ability to convert the entire pay to a check each and every pay period with no charge and access to ATM’s that don’t charge a fee within a certain mile radius of the employee’s work site. Many can be used to make purchases, both at POS and online and have bill paying options just like a traditional bank and often allow the card holder to make their own deposits into them or another direct deposit (say that of a spouse’s employer) and they are portable, meaning that when the employee leaves the employer, they can still use the pay card and continue to put money into it, even via a new employer’s direct deposit.
We in payroll love “paperless” pay and companies love the reduced costs over issuing paper paychecks.
https://www.paperlesspay.org/Paperlesspay/payrollcards.asp