Help Desk FAQ

Prepaid Cards

 

Are all prepaid card balances insured by the FDIC?

Many prepaid card accounts are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account if the bank fails. However, in some cases, the bank or a third party could be insured rather than the individual accountholder. And some card issuers do not deposit money in FDIC-protected accounts at all. So cardholders have to ask specifically if they and their individual accounts are FDIC-insured.

Cardholders might still be protected even without FDIC insurance. That’s because some states regulate financial service providers through “money transmitter” laws, which apply to non-bank businesses that facilitate consumer payments. Money transmitter laws ensure the soundness of the businesses they cover and the security of their customers’ money. State money transmitter licenses require that consumers’ funds, including prepaid card balances, be held in trust for those consumers in case the business fails. To find out if a card issuer is covered by money transmitter laws in your state, contact your state’s department of financial institutions or similar agency. (Do an online search for your state’s name plus “Department of Financial Institutions.”)

 
 
 
 

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