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The One Thing Prepaid Credit Cards Won’t Do

20 July 2013

Prepaid credit cards can be a great answer for those who have poor credit, or just want to make sure they don’t get too far over their heads into debt. We’re talking about the cards, available largely through Visa, that you can put money on, and then use them just like a regular credit card. Once the money runs out you can reload it, and continue using it just as you wish. These cards are available to almost anyone, because you’re not actually borrowing any money or credit, and they can help those who can’t get a card any other way to make hotel or car rental reservations online, and do a number of other things only those privileged enough to hold a card can do. But as great as these cards can be, there is one thing they don’t protect you from. That’s theft.

With a prepaid credit card there are two ways thieves can gain access to your money. The first is that they can physically steal the actual card itself and use it to make all kinds of purchases. There’s no bill going anywhere at the end of the month, but that person just bought something for them with your money, and without your permission. That’s stealing, and it’s the only case in which a prepaid credit card company will do anything about the theft. After calling the company and filling out a report, an investigation will occur and they will try to get to the bottom of things. They’ll also try and make sure that you get your money back. The other type of theft unfortunately, isn’t nearly as fixable.

That’s when a criminal gains access to your information only and uses it to take out the actual money that’s on the card. This practice is called ‘skimming’ and it’s something that’s becoming increasingly popular (with more sophisticated methods) every day in Canada. When a person skims either your debit or your credit card, they have access to all the information located within that magnetic strip. With that they can either create an entirely new card and use it however they wish, or they can just gain your PIN and use it to pull the money directly out of an ATM. And if this happens, there’s a very good chance you won’t get your money back.

Prepaid credit card companies claim upfront that if money is taken out of an ATM, and you claim you didn’t take it, they are not responsible for returning the money, nor will they do much if it happens to you. Because these transactions are so incredibly difficult to prove, and there’s no third party such as a retailer to help add to the case details, it’s your word against the thieves. And since most of the time people don’t even know who the thief is, it’s just your word. And that unfortunately doesn’t count for much when in the company of strangers these days.

We’re not here to advocate against prepaid credit cards, or to try and say they have no place in today’s consumer world. But we do want people to know that with these types of cards, you have to be just as careful as if you were holding an actual credit card. And perhaps even more so.

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