NEW YORK (
) -- In the last three years, the banking industry has been hammered by bad loans, increased regulations and a recession. During this time, prepaid cards have been one of the few bright spots of revenue growth for banks and lenders.
Consumers loaded approximately $57 billion onto prepaid cards in 2011, and loads are projected to reach approximately $82 billion in 2012, $117 billion in 2013, and $167 billion in 2014, according to the
Mercator Advisory Group
Currently, there are no government regulations and consumer protections on prepaid cards -- debit and credit card rules and regulations do not apply. But that may soon change. The
Consumer Financial Protection Bureau
is investigating the fees and practices of prepaid cards and seeking input on ways to enforce safety for consumers.
States are also taking action. A New Jersey Assembly committee is pursuing a bill that would limit fees and increase disclosure and transparency for consumers.
Government payments and refunds can be made directly to a prepaid card. Prepaid cards are also being used as a checking account with direct deposit for salary and ATM access. As usage becomes more mainstream, some consumer protections are needed.
Regulations may help, but consumers should take steps to educate and protect themselves with prepaid cards. Here are some important tips about using prepaid cards:
Prepaid cards have limited or no impact on your credit history.
According to the CFPB, the three main credit bureaus used by most lenders do not include your prepaid card usage in your credit report. The prepaid card providers that claim to report your credit history usually only report to smaller used credit reporting agencies and not one of major three agencies.
Shop around and read the fine print because all prepaid are not the same.
The terms and conditions may be long and confusing, but it is important to read these before you get the card so you will know where your money goes.
If your prepaid card expires while you have money on it, request a replacement card or a check to cash out the card.
When a prepaid card or gift card is unclaimed for a designated period, some states have escheatment laws that require the issuer to send the funds to the state of the last known address. The state can take custody of the card and add the value to the treasury's general fund until it is claimed by the rightful owner. The time of abandonment varies by state, but is typically two to five years.
A prepaid card may have a card network logo for Discover, Visa, MasterCard, and American Express, but it is not a credit card.