As more consumers ditch checking accounts in favor of prepaid cards, some fraudsters are targeting cardholders in online scams. A recent New York Times story by Matthew Goldstein highlights that one particular financial product seems to have become the focus of regulators.
It's called MoneyPak, and it's known as a "cash top-up card." Rather than working like a traditional prepaid card, MoneyPak performs three basic functions. It helps consumers reload cash on to other prepaid cards, add money to a PayPal account and make payments to major companies like phone providers, credit cards and TV services. MoneyPak customers are assigned a unique 14-digit access number that allows them to transmit their funds.
The problem? Many customers are giving away those secret numbers after inquiries from users posing as everything from bill collectors to government officials to sales representatives.
MoneyPak, which is owned by Green Dot, recognizes that customers have been falling victim to the scams. A message on the MoneyPak website offers guidance for avoiding them.
"Don't give your MoneyPak number to pay for something you buy through the classifieds or to collect a prize or sweepstakes," the statement reads. "Do not give away your receipt information to another party either. If you give your MoneyPak number or information about the purchase transaction to a criminal, Green Dot is not responsible for paying you back."
Greg McBride, CFA, senior vice president and chief analyst at Bankrate, reminds readers never to give away confidential financial information.
"Divulging a PIN, password or access code for anything is an invitation for unscrupulous individuals to rip you off," McBride says.
While MoneyPak is showing up in plenty of headlines now, the entire prepaid market has been causing an increasing number of headaches for consumers.
According to data from the Federal Trade Commission, there were almost 85,000 fraud complaints related to prepaid cards in 2013 that lead to estimated damages of nearly $43 million. That's quite the jump from 2012 when the FTC received nearly 17,000 complaints that totaled just under $7 million.
If you're planning to ditch your checking account, make sure you don't wind up as a victim of a prepaid card scam. Educate yourself with "5 prepaid debit card pitfalls to avoid."