If the card is offered by a bank, the answer is “yes”, prepaid cards are insured. However, there are many important facts that you should know about the coverage and the type of card you have.
While traditional checking accounts and savings accounts are still considered to be widely popular among consumers, many are turning to other types of financial products – such as prepaid cards – to make purchases, pay bills, and conduct monetary transactions online.
Many prefer these cards as they are not linked to a checking or savings account and do not require the holder to have a line of credit for utilization.
Those that elect to incorporate prepaid cards into their financial regimen often wonder if the products are insured by the FDIC.
Is the Card Eligible for Coverage by the FDIC?
To determine if your prepaid card is covered by the FDIC, you will need to start by checking whether or not the issuing institution provided you with a special disclosure stating coverage eligibility.
If you find that it is – in fact – eligible, you must then officially register the card with the issuer. If you fail to take this step, the FDIC will be unable to identify you in the event that the issuer fails and your card will not be covered.
If you do register your card, the issuer will be able to identify you and the balance on your card at the time of the failure.
Are There Any Requirements When It Comes to Bank Records on Prepaid Cards?
The answer to this question is “yes”. The requirements are as follows:
- The account associated with the card should include the name of the owner of the card.
- The card must include the fact that the account provider is acting as the agent of the cardholder.
- If bank failure occurs, the issuer will be required to provide a list of the owner/owners of the account and the amount that was left on the card at the time of the occurrence.
- The validation of the account owner should be available in the contractual agreement, the card issuer, as well as through the owner, themselves.
How Much is Covered?
If the bank that issued the card failed and the prepaid card was appropriately registered, the consumer/owner of the card would have an insurance plan that would go into effect immediately and would be covered for up to a total of $250,000. Of course, the coverage would be limited to that amount which was available on the card at the time of the failure.
For example, if the prepaid card had a balance of $10,000 on it, the FDIC would cover the card for only the $10,000 – not more.
Are There Any Instances When My Money on the Prepaid Card is Not Covered?
Yes, there are cases where the FDIC does not insure the money on a bank issued prepaid card.
Examples of these include cards that are lost, cards that are stolen, and illegal access to your funds by an unauthorized user.
In some instances, there are measures or steps listed in your account agreement that instructs you on what to do if these situations occur.
In other instances, you must attempt to recover any losses by following your state’s laws on the situation and/or the federal laws that govern these events.
Are Prepaid Gift Cards Covered by the FDIC?
No, at this time, the FDIC does not provide any type of coverage for prepaid gift cards.
If you want to purchase a gift card, you must read the agreement associated with that product to determine what the issuer states as far as coverages and protections. These are offered by the issuer only, not the FDIC.
How Can I Contact the FDIC?
If you have any issues, questions, and/or concerns related to a bank-issued prepaid card, you may contact the FDIC by calling the following phone number: 1-877-275-3342 OR 877-ASK-FDIC. Or visit their website for more information.
We Can Help
If you have an interest in learning about bank-issued prepaid cards and/or information pertaining to FDIC covered financial products and/or services, you may contact us here at Somerville Bank. With nearly 110 years of experience, our trained staff will be able to help you with all of your financial needs.
We offer a multitude of low-cost products and services and are able to assist you with all of your financial requirements. We are available in multiple locations, for your convenience.
To contact us, visit one of our: Locations