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Banking brainpower protection

By David McMillin · Bankrate.com
Saturday, March 10, 2012
Posted: 9 am ET

In conjunction with National Consumer Protection Week, the Federal Deposit Insurance Corp., or FDIC, has released a guide to help consumers understand some key characteristics for the pieces of banking plastic in their wallets.

With pages and pages of fine print and account terms, understanding credit, debit and prepaid cards can be a challenge. The FDIC's useful info provides a good overview of what each card means for you. The prepaid category is not as easy to grasp, simply because prepaid cards come in a range of forms: employer payroll cards, general purpose reloadable, or GPR, cards and gift cards.

While there are quite a few differences among the three types of plastic, I'll highlight what I believe are the three biggest distinctions for banking customers.

Unauthorized charges: Credit cards are the clear-cut winner here, as cardholders are liable for no more than $50 of unauthorized payments. Debit cards and prepaid cards may fail to offer the same kind of robust protection. If you fail to notify your bank or card issuer within two days of fraudulent charges, you can be responsible for $500 worth of charges, and when it comes to GPR cards and gift cards, you may not be able to recover any of your funds.

Upcoming changes: As banks and nonbanks continue to restructure agreements and test new fees, account holders should stay on top of any amendments to the way their cards work. The law requires that cardholders with credit cards, debit cards and prepaid payroll cards receive early warnings of any changes. However, if you're carrying a GPR card or gift card, you may be out luck. No law requires consumer notification of changes.

Fees, fees and fees: While understanding any service fees for credit cards and debit cards is relatively easy, prepaid cards are another story. My colleague, Claes Bell, has covered prepaid debit cards quite a bit over the past few weeks, and the FDIC echoes many of his warnings about these pieces of plastic. From activation fees to charges for talking with a customer service rep, some companies that offer prepaid cards add on a laundry list of additional expenses.

What kind of plastic are you using to pay for your purchases? Do any of these differences make you consider using a different card?

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