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:
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.
- Are Discover Card credit cards any good?
- Is a credit score of 725 considered good?
- Which bank offers the best debit card?
- Supposing you have a perfect credit score of 800 or better; which credit card offers the highest credit limits?
- On a credit card application, can you include your spouse's income under household income? What about other people that live with you?