Prepaid cards, also known as prepaid debit, stored value, or gift cards, are convenient ways to pay for your purchases. Banks and retailers issue them to offer consumers a way to make payments and conduct other financial transactions. You do not need to have a bank account or a credit history to use a prepaid card. There are plenty of situations where a prepaid card might be the most convenient choice, but be sure you understand the key terms and conditions BEFORE you buy.
Many cards carry protections similar to credit and debit cards. To obtain these benefits, you must follow the instructions for registering and activating your card. Be sure to record your card information, including the customer service telephone number listed on the back of the card in a separate place, so you can get a replacement if yours is lost or stolen. Some prepaid card issuers may charge fees for card activation, maintenance, and cash withdrawals.
Payroll and General Purpose Spending Cards
Payroll and general purpose spending cards can be very useful for those who want to budget their money and for those who don't have a checking account or credit card.
General purpose spending cards, which may be purchased by consumers, typically charge a monthly maintenance fee and could charge additional fees for adding funds to the card and/or making purchases or getting cash.
Payroll cards are similar to general purpose spending cards except that they are provided by employers in place of paychecks. Payroll cards typically allow a certain number of ATM withdrawals without charge to the cardholder and usually do not assess fees for purchases.
Good News for Gift Cards
Under the Credit Card Accountability Responsibility and Disclosure Act of 2009, gift cards and other similar cards cannot expire within five years from the date they were activated unless the expiration date is clearly disclosed. The law also prohibits an inactivity fee on gift cards except in certain circumstances, such as if there has been no transaction for at least 12 months.
Tips for Using Gift Cards:
- Read the terms and conditions as soon as you get the card and check the expiration date.
- Record the card's ID number and the customer service telephone number, and keep the information in a safe place until you've spent all of the money on the card.
- If you didn't get the card's terms and conditions or original receipt, ask for them from the person who gave you the card.
- Take care to safeguard your card. If it is lost or stolen, report it to the customer service number immediately, supply the ID number, and request a replacement.
- Spend the value on your card before the maintenance fees start. If your card expires before you've had the chance to exhaust its value, contact the customer service number. It might be possible to extend the date, although you may be charged a fee.