A CARD Act of 2009 mas a major change that turned the industry towards the consumer and eliminated some of the most predatory tactics implemented by banks. Unfortunately, the Act didn’t make a huge difference for prepaid cards.
Despite the fact that prepaid cards are focused more on unbanked lower income population, the rules that apply to prepaid cards segment are much less strict.
One of the most important areas where prepaid are behind is the disclosure requirements. All credit cards have a Rates and Fee information (a Schumer Box) that helps in understanding the cost of owning a card. Prepaid cards lack that simple yet effective tool, which results in an extremely complicated fee structure for most prepaid cards (the average prepaid card cost $170-$300/year in fees).
Another problem is that it is not made clear enough by the issuers that prepaid and debit cards do not help to improve your credit.
Prepaid cards lack some of the important security and protection features that credit cards have – fraud losses protection in particular.
Recent Federal Reserve study shows that prepaid is intensively used by Millennials and ‘power users’, thus making it more important to fix the issues with prepaid and debit cards while more and more people start using them.