Is a prepaid card account right for you?

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1 Is a prepaid card account right for you? Get the information you need to decide.

2 Prepaid card accounts are a growing financial alternative to traditional checking and savings accounts or credit cards. Many people 50 and older don t have access to affordable, dependable financial services. Living without bank accounts or credit cards can make it hard and expensive to manage everyday life. One solution is a prepaid account. That s why AARP Foundation gathered this information. You ll learn about the benefits as well as the drawbacks of prepaid accounts, so you can determine if one is right for you or someone you care about. We ve also included some tips to help you choose the best prepaid card account for your needs. We re proud to be a resource and an advocate for people 50 and older, especially when it comes to helping you manage your finances and make the most of what you have. To learn more about AARP Foundation, the separate, charitable affiliate of AARP, please visit aarpfoundation.org. Prepaid card accounts generally work like any debit card associated with checking accounts. First you ll need to load money onto your card account. Funds can be loaded by cash, online transfer or direct deposit. Some accounts enable you to set up direct deposit of social security and other benefits. Once money is loaded onto your card account, you can make purchases anywhere the card s brand (such as Visa or MasterCard) is accepted. Using a prepaid account is safer than carrying large amounts of cash. It can help you avoid credit card debt because you can only spend money that s loaded onto the card. Prepaid card accounts can also generate automatic electronic records of your spending, which can help you stick to a budget. 1 2 Load/reload money to FDIC-insured card account Transfer funds from a bank account, set up direct deposit, or load cash through authorized prepaid network locations. Note that some fees may apply. Store and manage money Check your balance and track your spending online, on your monthly statement or over the phone. Note that some fees may apply. How it works 3 Access and use your money a variety of ways Withdraw cash, pay bills, book travel, shop for groceries and more! Prepaid Card Account Cardholder Name 12/13

3 Prepaid accounts are not dependent on a credit score, credit check or Chexsystem review. In fact, debit and credit cards offered by a bank may be harder to obtain because they may require a review of your credit history and other personal information. But prepaid card accounts do not build personal credit because your transactions are generally not reported to a credit bureau. Prepaid accounts make sense for people who: Currently depend on alternative financial services such as check-cashing outlets, payday lenders, supermarkets or convenience stores to cash checks, pay bills or make purchases Do not want or cannot open an account with a bank or credit union Are concerned about managing Who s eligible spending and want to make sure they only spend money that they have Understand the costs and fees, disclosures and contract of a prepaid card account Prepaid card accounts come with costs and fees, typically including: Activation fees A number of prepaid accounts include an activation fee, or the cost to turn on the card. Ongoing fees Most prepaid accounts have a monthly fee. However, the amount varies and may even be waived depending on how often you use the card or if you are able to meet other criteria, such as direct depositing a certain amount on a regular basis. Sometimes monthly fees may be waived during an introductory period that lasts for a limited time. Cash withdrawal fees Prepaid accounts may also charge you a fee to withdraw money from an automatic teller machine (ATM) or financial institution. Fees to add money to your account While direct deposit is generally free, you may have to pay to load money onto your card account using other methods. How much it will cost Transaction fees Prepaid card accounts may charge you a fee to use the card to make purchases. Generally, PINbased transactions (purchases where you enter your PIN rather than your signature) will incur higher fees. You also may pay fees to check your balance, access customer service or receive paper statements. The bottom line: as with all financial services, you should review and understand all the fees, terms and conditions before you get a prepaid account.

4 Prepaid accounts may not offer the same safeguards as traditional credit or debit cards. When you report your prepaid card lost or stolen, or your prepaid card issuer goes out of business, you may not get the same protections for the recovery of your money. The funds loaded onto a prepaid card account may or may not be FDIC-insured, so it s important to check your card terms. Consumer protections offered by prepaid card accounts are voluntary and can be revoked or revised by the issuer at any given time and for any given reason. Choosing the best prepaid card account for you Think about how you will use the account. Will you need a card account that allows you to send check payments? Will you receive federal benefits (such as social security or other payments) on the card? If these features are important to you, be sure the account you choose can do these things. Benefits 1. Safer than cash 2. No credit check 3. Widely accepted 4. Difficult to spend more than you have Drawbacks 1. No credit building 2. Fees can add up 3. Not all card accounts are FDIC-insured 4. Customer service can vary How it protects you Think about the costs that you will incur. Do you understand the fees, disclosures and contract related to the card account? Can you take the actions needed in order to avoid the fees? Look for a card account that protects you and your hard-earned money. Is the card account FDIC-insured? What are the account s policies on card theft and fraud?

5 Prepaid card accounts are intended to be an easier, safer and cheaper way to manage your money and get the benefits and protection you deserve. But make sure you understand what a prepaid account can and cannot do for you. AARP Foundation 601 E Street NW Washington, DC Toll-Free Nationwide: 888-OUR-AARP ( ) Toll-Free TTY: aarpfoundation.org Information for this brochure was adapted from the Center for Financial Services Innovation (CFSI), AssetPlatform.org a resource for nonprofits developed by the Aspen Institute and the Center for the Study of Social Policy and Community Fiancial Resources. MAKE AN INFORMED CHOICE D19727