Prepaid debit cards are becoming more commonplace these days. According to Cardhub.com, the Federal Reserve found that there was more than 20 percent growth rate for prepaid card transactions between 2006 and 2009. The perks of using a prepaid debit card include no bank checking account or overdraft fees, the ability for consumers to have their money directly deposited and even allow them to pay bills online. This is particularly good for those who don’t qualify for a bank account and for younger consumers looking to watch how they spend their money.
The prepaid card is not without flaws, however. Consumers should note that prepaid card does not have FDIC protection — this feature offered by traditional checking accounts gives customers insurance of up to $250,000. As stated in this New York Times article, Prepaid Cards May Lack Protections of Checking Accounts,
Most prepaid cards say they offer “pass through” deposit insurance, by pooling funds in federally insured, third-party bank accounts. But at least one company — American Express — does not, the report found.
Rather, American Express prepaid cards operate under state “money transmitter” laws.
Are you using prepaid debit cards? If your main reason for having one is to avoid debt, you may also need to look settling any outstanding debt you owe yet can’t afford. Debt settlement may be a good option, or even Chapter 7 Bankruptcy. To learn more about these avenues of financial freedom, contact our consumer attorneys of Orange County at (800) 600-6225 to see how you can start fresh.