New prepaid credit card regulations: what you need to know
Video: Feds promise new rules to protect consumers from hidden fees associated with pre-paid credit cards. Shirlee Engel explains.
TORONTO – The prepaid credit card industry is known for hidden and confusing fees that can drain them of their value over time, but regulations announced Tuesday aim to better protect Canadian consumers.
A prepaid “credit” card is a bit of a misnomer, since there’s no actual credit and therefore no threat of going into debt. You preload the card with your own money and can only spend up to the amount you put on it, but the cards are run by credit card companies—hence the name.
It’s good for consumers who have trouble obtaining credit since you don’t need a credit check to get one. You can use the card internationally, and you can have one if you’re under 18 years of age. The cards are also a popular gift idea.
What are the new rules?
• No more expiry dates
• No more dormancy or maintenance fee for at least one year after card activation (the government calls one year a “healthy timeframe” in which to use it)
• Cards will have to clearly show fees in an information box on outside packaging before the card is issued
• Information on how long you can use it must be clearly displayed, including where the full terms and conditions are located, and a toll-free number to access the remaining balance
Who do the new rules apply to?
• All federally regulated financial institutions that issue prepaid cards (i.e. Visa and Mastercard). These cards are sold by retailers.
What if you already have a prepaid credit card?
• Unfortunately, the new rules won’t be in place for the holidays, so you should read your terms and conditions to check for expiry dates and maintenance fees if you already have one.
• The new regulations will come into effect on cards purchased as of May 1, 2014, so the industry has time to comply.
Below: Federal Minister of State for Finance Kevin Sorenson explains the new regulations surrounding prepaid credit cards
© 2013 Shaw Media