Is Your Money Safe if Your Prepaid Card Fails?

What happens to your money if your prepaid card issuer goes broke? We’ve surveyed all of the most popular prepaid cards to find out when you’re protected…and when you’re not.

Is Your Money Safe on a Prepaid Card

When was the last time you asked your bank for its balance sheet? Probably never. We take for granted that money in our bank accounts are safe even if the bank goes under.

That’s thanks to FDIC insurance. FDIC insurance is the federal government’s guarantee of bank deposits. It insures each depositor up to $250,000 in the event the bank fails. Federal law requires all banks to have it. Credit Unions have the equivalent with NCUA insurance.

But what about prepaid cards? Is the money loaded on the card safe if the card issuer goes bankrupt?

Probably.

How FDIC Insurance Applies to Prepaid Cards

With a prepaid card, you don’t have an associated bank account. But you can still have the same FDIC protection as checking or savings accounts.

That’s because the funds you deposit on a prepaid card are held in a bank account, just not a separate one. The FDIC calls the account a “pooled account.” Funds on many prepaid cards are “pooled” together in a single bank account.

The FDIC insures pooled accounts if the account is set up as a custodial account for the cardholders.  The account must also identify the individual cardholders and track the funds owned by each. So Netspend Prepaid Visa, for example, may keep cardholder money in its own named account. But its account lists its cardholders as the owners of the funds.

If the account meets those requirements, the money in the account, and the prepaid cardholders that own it, are covered. It’s what the FDIC refers to as “pass-through” insurance. The protections are passed through to the cardholders. Pass through insurance offers the same FDIC protections as those available to bank accounts.

Although there is no legal rule that prepaid card accounts have FDIC insurance, nearly all do.

Which Cards are Covered?

We reviewed the terms and conditions of 48 prepaid cards. And 45 purport to meet the requirements for FDIC insurance, according to the cardholder agreements that govern the accounts. (see below)

Not surprisingly, all the brick and mortar bank-issued prepaid cards have FDIC insurance. Those include Chase’s Liquid cardFifth Third’s Access 360 card, and Wells Fargo’s EasyPay card.

So do most popular prepaid cards from non-bank distributors. Like Netspend, Brinks, and Walmart MoneyCard. Generally, cards distributed by these companies are issued by the bank that holds the funds. MetaBank, for instance, is the issuing bank for Netspend. MetaBank rather than Netspend holds the account containing the cardholders’ deposits.

All of the prepaid cards designed for teenagers also meet the requirements for FDIC insurance. Those include the Current card, goHenry, and FamZoo.

The cardholder agreements of three of the cards are silent about FDIC insurance–the MyVanilla card, the H&R Block Emerald card, and the U.S. Money Prepaid Mastercard. Though the MyVanilla and Emerald cards say elsewhere on their websites that their cards are covered.

What Cards (or Funds) Aren’t?

Unregistered reloadable prepaid cards aren’t covered by FDIC insurance. Those are the temporary cards that you buy in retail stores like Walmart or 7-11. That’s because those cards, and the funds that you load on them, aren’t registered in your name. The money becomes insured only after you register the card and get the personalized card in your name.

Non-reloadable prepaid cards aren’t covered either. Those include store-specific gift cards, like a Kohl’s or Best Buy card. They also include non-reloadable, general purpose prepaid cards. Those are the gift cards that carry the Visa or Mastercard logos but aren’t personalized.

For the same reason, cash reload cards, such as Green Dot MoneyPak or the Reloadit pack, aren’t insured. They don’t identify the purchaser.

The Bottom Line

Money on prepaid cards can have FDIC protections, like bank accounts. And in fact, almost all reloadable prepaid cards do.

But they’re not required to. So it’s essential that you verify the card has FDIC insurance by reading the terms and conditions. That way, if the card’s bank goes under, your money doesn’t go with it.

FDIC Insurance for Prepaid Cards
Prepaid Card Issuer/Bank FDIC Insured
1-2-3 Rewards® Prepaid Card U.S. Bank Yes
Access 360° Prepaid Card Fifth Third Bank Yes
AccountNow Gold Visa® Prepaid Card Green Dot Bank Yes
ACE EliteTM Visa® Prepaid Card MetaBank Yes
AkimboTM Prepaid Mastercard The Bancorp Bank Yes
American Express Serve® American Express Travel Related Services Yes
American Express Serve® Cash Back American Express Travel Related Services Yes
BB&T MoneyAccount® Branch Banking and Trust Company (BB&T) Yes
BBVA Compass ClearSpend Visa® Compass Bank Yes
Bento for Business Community Federal Savings Bank Yes
Bluebird by American Express American Express National Bank Yes
Brink’s Prepaid MasterCard® BofI Federal Bank Yes
CashPass Visa Prepaid Card Metropolitan Commercial Bank Yes
Chase Liquid Chase Yes
Commerce Bank mySpending CardTM Commerce Bank Yes
Control Prepaid MasterCard® MetaBank Yes
Current Prepaid Visa Card Finco Services, Inc. Yes
dash™ Prepaid Mastercard® Sunrise Banks Yes
Emburse Prepaid Debit Card Sunrise Banks Yes
FamZoo Prepaid Card Four Corners Community Bank Yes
Fred Meyer Rewards® Card U.S. Bank Yes
CARD.com Visa® Account Prepaid Card Central Bank of Kansas City Yes
Green Dot Cash Back Visa® Debit Card Green Dot Bank Yes
Green Dot Prepaid Visa® Green Dot Bank Yes
H&R Block Emerald Prepaid MasterCard® BofI Federal Bank Not in Terms/Conditions
Insight Visa® Prepaid Debit Card Republic Bank of Chicago Yes
Kmart Halogen Prepaid Card Green Dot Bank Yes
Mango Prepaid Mastercard Metropolitan Commercial Bank Yes
MileagePlus® GO Visa® Prepaid Card Republic Bank & Trust Company Yes
MyVanilla Prepaid Visa® Card The Bancorp Bank Not in Terms/Conditions
Netspend® Small Business Prepaid Mastercard® MetaBank Yes
Netspend® Visa® Prepaid Card MetaBank Yes
NexsCard Prepaid Visa Metropolitan Commercial Bank Yes
OnBudget Prepaid Mastercard Sunrise Banks Yes
PayPal Prepaid MasterCard® The Bancorp Bank Yes
PEX Visa® Prepaid Card The Bancorp Bank Yes
PNC SmartAccess® Prepaid Visa® Card PNC Yes
Regions Now® Card Regions Bank Yes
RushCard Prepaid Visa® MetaBank Yes
TD Connect Card TD Bank Yes
TD Go Reloadable Prepaid Card TD Bank Yes
Turbo Prepaid Visa® Card Green Dot Bank Yes
U.S. Money Prepaid MasterCard Metropolitan Commercial Bank Unknown
Uber Visa Debit Card Green Dot Bank Yes
Univision MasterCard® Prepaid Card MetaBank Yes
Walmart MoneyCard® Green Dot Bank Yes
Wells Fargo EasyPay Card Wells Fargo Yes
Western Union® NetSpend® Prepaid Mastercard® MetaBank Yes

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