dcsimg

Ask the expert

Add captcha
Close
Enter the text shown above:

Does the prepaid credit card protect from fraud?

By , CardRatings contributor
  • Google +
  • Twitter
  • Facebook

Question: Does the prepaid credit card protect from fraud?

Answer: Unfortunately prepaid card fraud is just as rampant as fraud on normal credit cards. The major difference is that prepaid cards have fewer protections. In general, the only protection you can count on is that no more can be taken from the prepaid card than the face value or remaining balance, whichever is lower.

There are exceptions to the rule. Some prepaid cards offer the same protections as credit cards, although they have higher fees and interest than you find with credit cards. To determine if there are protections, read the prepaid credit card offer.

That doesn't mean you should completely rule out prepaid cards: a big advantage to prepaid credit cards is that they are not tied to your checking account, and you usually have personal identification number (PIN) protection. In addition, improvements in regulation are helping to cut down on prepaid card fraud. Under the Credit CARD Act of 2009, more data collection and reporting from businesses was required. The new rules focus on cards that:

  1. Don't have the value clearly labeled on them.
  2. Are reloadable at places other than banks.
  3. Can have a maximum lifetime value of more than $1,000, including reloads.
  4. Can be used anywhere, especially internationally.
  5. Can have the value transferred to another card.
  6. Are purchased in large amounts.

In short, the goal of the new rules is to keep prepaid cards out of the hands of terrorists.

So, the complete answer to your question is there are limited protections with most prepaid cards, and you will pay a premium for those prepaid cards that do offer protections similar to most credit cards. However, improvements in regulations are assisting in the reduction of fraud. The final word is be careful and buyer beware.

0 Responses to "Does the prepaid credit card protect from fraud?"

No Comments

Leave a Comment
 
 
 
About Our Ratings ×

Our editors rate credit cards objectively based on the features the credit card offers consumers, the fees and interest rates, and how a credit card compares with other cards in its category. Ratings vary by category, and the same card may receive a certain number of stars in one category and a higher or lower number in another.

The ratings are the expert opinion of our editors, and not influenced by any remuneration this site may receive from card issuers.

Advertisers in our database are highlighted, and advertisements include an option to apply using links on our site. CardRatings.com may be compensated by companies mentioned on the site when a user's application is accepted or approved by such companies.

How do your cards stack up?

Compare your card starting here

NEXT »

Featured Partner Cards

loading