FDIC Issues a Quick Guide for Consumers on Credit, Debit, and Prepaid Cards
By: Andrew L. Caplan*
*Mr. Caplan is admitted to practice in NY (not admitted in DC); supervised by Nanci Weissgold, a member of the DC bar
As Gertrude Stein once wrote, “a rose is a rose is a rose.” However, as indicated in a recent Federal Deposit Insurance Corporation (“FDIC”) consumer guide, a card is not a card is not a card.
On March 5, 2012, the FDIC issued A Quick Guide for Consumers on Credit, Debit, and Prepaid Cards (“the Guide”) to help consumers appreciate the differences among credit cards, debit cards, and prepaid cards. As indicated in a recent FDIC press release, “[t]he guide is intended to help consumers who routinely use cards to pay for goods and services but who don’t always understand the differences in how these cards work or the applicable consumer protections.”
At the most basic level, the Guide explains to consumers that a credit card is a loan, a debit card is a direct link to a bank account, and a prepaid card generally allows consumers to spend only the money that is deposited onto the card. The Guide breaks down the distinctions among credit cards, debit cards, and prepaid cards into the following categories: (1) what it is; (2) how it works; (3) liability for unauthorized transactions; (4) disclosures; (5) periodic statements; (6) change in terms; and (7) interest rate and fee limits. For example, with respect to liability for unauthorized transactions, the Guide notes that a consumer using a credit card is liable for a maximum of $50 if the credit card is lost or stolen (subject to even greater protection). A consumer using a debit card, on the other hand, will only enjoy this protection if he/she notifies the bank within two business days after discovering the unauthorized transaction. Finally, with respect to a prepaid card, a consumer may enjoy no protection at all if the card is a reloadable card or gift card. In like fashion, the Guide describes the differences and similarities among the seven categories listed above.