Tuesday, November 1, 2011
Prepaid cards require "no approval process, no credit check, no bank account and no interest payments," said the St. Louis Fed. "Those with no bank account or bad or non-existent credit histories, thus unable to acquire a credit card, can purchase prepaid cards."
However, the reserve bank reported that prepaid cards may lack consumer protections found on credit and debit cards. Issuers of network-branded, general purpose reloadable (GPR) cards are not always required to provide the same consumer protections that are required of debit card issuers. But competition and market dynamics have resulted in GPR card issuers offering greater consumer protections than what are provided for closed-loop gift cards, for example, the article said.
The St. Louis Fed listed the consumer liability protection policies of the card brands in relation to GPR cards:
The reserve bank added that some banks issuing GPR cards offer the same protections provided with debit cards, including a $50 maximum liability if the cardholder notifies the bank within two days of discovering the unauthorized use of the card and a $500 maximum liability if the cardholder notifies the bank within 60 days.
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