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5 prepaid debit card pitfalls to avoid

Debit Cards » Best Prepaid Debit Cards » 5 Prepaid Debit Card Pitfalls To Avoid

Lack of FDIC coverage
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Conventional checking accounts come with some pretty robust consumer protections, including fraud protection and insurance coverage by the Federal Deposit Insurance Corp. Unfortunately, prepaid debit card holders don't necessarily get those same protections.

Prepaid card providers aren't currently required to provide FDIC insurance, Feltner says.

"Some prepaid debit cards have deposit insurance, and others don't. That's important for consumers to realize as they're making a transaction account choice because you really have to look at the reputation and the solvency of the financial institution," Feltner says.

That may not seem like a big deal, but if a prepaid debit card provider runs into financial trouble, it could put funds loaded on prepaid debit cards in jeopardy.

"It makes sense, particularly if you're having your paycheck loaded onto one of these, that you have the same federal insurance protection you would if you had a bank account," McBride says.

Nearly all the prepaid debit cards surveyed in Bankrate's annual study provide FDIC insurance, but be sure to verify that a prospective card has FDIC coverage before loading up your funds on one, McBride says.

 

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