A client at the volunteer income tax site asked if we could load her tax refund on a prepaid card. The free volunteer site doesn’t offer a prepaid card option; refunds are direct deposited or sent by paper check. Some prepaid cards restrict deposits of federal funds. A test of prepaid cards was completed by volunteers a number of years ago. The sites raised concerns about the fees and hidden charges associated with the cards. An example was a $25 fee paid to receive a cash withdrawal from refunds loaded on a card.
The Consumer Finance Protection Bureau proposed rule changes for the popular cards in 2016. They are used by employers to issue paychecks, government agencies for benefits, and colleges/universities for financial aid. The new rules took effect on April 1, 2019.
Primary changes include simple upfront details of fees for store purchased cards; expanded access to account activity and balances at no charge; and registration options that afford protections if the cards are used for unauthorized transactions, lost or stolen. These rule changes also apply to electronic wallets.
Employers, government agencies, and colleges/universities must offer an alternative method of funds transfer. If a card option is used there must be access to monthly account transactions and fees.
Consumers should read materials explaining card use; register their cards when the option is available; and become more informed about their rights. Cards can have high fees that make their convenience questionable.