Prepaid debit cards endanger people’s safety
Beware of what you get when choosing a prepaid debit card reloadable at stores such as Wal-Mart and grocery stores.
Las Vegan Brian Rohan wished he had.
Rohan was shopping at Wal-Mart on Rainbow and Cheyenne avenues and picked up a $ 50 prepaid debit card, which he paid in cash on November 29. He bought it for his daughter, who wanted to buy something online. Cash wouldn’t do; she needed a way to transfer money over the Internet.
When her 17 year old daughter tried to activate the card at www.WalmartMoneyCard.com, she was asked to provide all of her personal information, name, address, phone numbers, email address, birthday and – the last straw – his social security number. Her father said absolutely not to the latter request, fearing that she was vulnerable to identity theft.
He tried to return the card to Walmart to get his $ 50 back, but the store refused to return his cash payment to him. He said a supervisor told him, “Once you buy the card, it’s yours, you own it. It cannot be exchanged or returned.
What he found most appalling was that the request for all the information was made because of the Patriot Act, according to the website.
It seemed ridiculous to him (and to me). But apparently that’s one more thing the government wants to know about you to prevent terrorism and money laundering.
Consumer Reports, my favorite magazine right after Vanity Fair, warned people in March 2012 about the multitude of dangers of prepaid debit cards and their low resistance to regular bank credit and debit cards.
Their advantages are that you can get one if you don’t have a bank account and no credit check is required. Salaries can be deposited directly to the card and the cards can be used to pay for utilities, among other things.
For people without a bank account, this is an option. But not necessarily a big one.
Cons: high fees. Sometimes you pay a fee even if you don’t use the card for a while. If you are trying to increase your credit score, these cards just don’t do the trick. Thieves can steal and use the card, and customers may not get their money back.
On the reverse side of this Wal-Mart MoneyCard Preferred was fee details, including $ 6 purchase fee, $ 3 monthly service fee, $ 4.95 fee for reloading the card with over cash, a $ 2 fee to use it at an ATM. (which may also charge a separate fee), a $ 1 fee to see what the ATM balance is, a $ 3 replacement fee, and yes, other fees are possible as well. Some cards charge for a call to customer service, which seems absurd.
Nowhere on the outside of the Wal-Mart MoneyCard Preferred packaging was it revealed that the buyer was going to have to provide personal information a hacker dreamed of. Rohan wouldn’t have bought the card if he had known it would be necessary. Gift cards are available that do not require personal information.
Wal-Mart did not respond to repeated requests for comment on Monday and Tuesday.
Consumer Reports said prepaid debit cards present “dangers and pitfalls” for users. “Consumers who use prepaid cards risk losing all their money and facing multiple, high and sometimes confusing fees. “
Despite this, these cards are growing in popularity, behind conventional credit and debit cards. But Consumer Reports called them a “shaky alternative to a bank account and debit card.”
The Consumers Union, the advocacy arm of Consumer Reports, has made a series of recommendations to the Consumer Financial Protection Bureau, suggesting changes, including reducing and simplifying fees, eliminating inactivity fees and better information clearly indicated on the packaging. (The Wal-Mart card had the fees listed on the back of the package.)
In November, the office made some suggestions to improve prepaid cards by making it easier to compare card to card, as well as offering certain protections to people.
The office is asking people to share their opinions on its website before a final rule is adopted.
Many of these cards will be purchased this season, and many customers will be shocked at the high fees and horrified by requests for personal information to activate the cards.
Experts predict that prepaid cardholders are likely to be targets of identity fraud, so it seems Rohan was smart to realize that he shouldn’t be giving all of this information to the cyberworld. He wanted to warn others to beware of prepaid reloadable debit cards and learn from his mistake, one that cost him $ 50.
Consider yourself warned.