Warning: These prepaid cards come with strings attached (2024)

Lisa Bernard-Kuhn|lbernard@enquirer.com

The bright blue plastic card promised to make getting a flu shot easier for Bruce Meadows by letting him go to any nearby pharmacy.

But "why would I need a new card to get a flu shot when Medicare already covers (the vaccine), and I already have a Medicare card?" the 82-year-old Mason resident wondered.

While the card was sent from Aetna, Meadows' Medicare Advantage insurer, it actually was a prepaid card from Citi that works much like a credit or debit card. Cashing it in to get a flu shot meant Meadows could avoid paperwork hassles to get reimbursed by his insurer, but at the expense of giving up a slew of legal rights – including his right to a jury trial, class action lawsuit or appeal process – against the global financial giant.

From flu shots to health savings accounts to checking accounts and more, consumers are increasingly being forced to weigh their legal rights against the benefits of easy-to-use credit or debit cards – prepaid or otherwise.

The cards, like a growing list of other business contracts, include a provision that requires users to solve nearly all disputes out of court through arbitration.

"If you were to look in your wallet right now, the chances are high that one or more of your credit cards, debit cards or prepaid cards would be subject to a pre-dispute arbitration clause," said Richard Cordray, director of the U.S. Consumer Financial Protection Bureau during December testimony to Congress.

The bureau is studying the impact that arbitration provisions are having on consumers.

Supporters of the clauses say arbitration can be a more convenient, faster and cheaper way to settle disputes without the hassle of the courts.

But opponents say the clauses rob consumers of their legal rights and are often packed with undecipherable legalese only intended to insulate businesses from potentially costly litigation.

As with most consumer financial products, the cards' terms are "take it or leave it" propositions that can't be negotiated, said Cordray, a former Ohio attorney general.

"They encourage you to use the card with this easy-to-understand language and marketing material, and in the same envelope include a confusing legal agreement that I don't think most people in their elderly years would understand enough to know what they're giving up," said Meadows. "That seems like a shame to me."

A February report published by Pew Charitable Trusts shows a growing number of checking accounts and prepaid cards include binding arbitration agreements "that are confusing to most consumers, even if carefully read."

The provisions are so prevalent in card contracts, according to the report, that they prevent consumers from shopping around to try to avoid the terms. The contracts even apply to programs like private health insurance plans – and with nearly 20 percent of all employer-covered workers enrolled in high-deductible health insurance plans last year, a growing number of consumers are likely to find arbitration language attached to their health savings accounts.

"I think the public, generally, has no damn idea that they're getting hoodwinked into giving away the constitutional rights that our forefathers died for," said John Metz, a Hyde Park-based medical malpractice lawyer. "But more and more corporations are doing this – and the courts have said it's OK."

US Supreme Court upholds arbitration clauseAmong the most notable cases upholding arbitration provisions is a 2011 U.S. Supreme Court ruling that allows companies to block class-action lawsuits by forcing each complaint into arbitration.

The decisionwas the result of a lawsuit filed against AT&T by a California resident who was charged taxes on the full retail price of a cellphone he bought at a discount. When the buyer pursued class-action status, AT&T pointed to an arbitration clause in its cellphone contract.

"The courts have basically said they will not interfere with contracts, because they are so important to business, so more corporations are putting this in, and are essentially free of the justice system," said Metz.

For its part, Citi says the language used in the pamphlet included with Meadows' Flu Care card is typical for all recipients of the card.

"The arbitration agreement is included as standard with all Citi-issued prepaid cards," the company said in an email. "We continuously review and update our policies to ensure they are appropriately designed and compliant with all applicable regulations."

The company added that, "in general, cardholders have not expressed concern regarding this provision."

In 2011 Aetna began offering the Flu Care card to large self-insured employers and groups. Meadows got one because he has a Medicare Advantage plan as a member of the State Teachers Retirement System of Ohio.

The perk to the card, says Aetna, is that it serves as a reminder to get the flu vaccine and helps expedite the paperwork process for the consumer.

"For members who choose to get a flu shot at a pharmacy, this debit card eliminates any hassle for the member. They show the card and Aetna gets the claim for the flu shot," said Rohan Hutchings, a spokesman for Aetna. "It is a one-time-use card so the member doesn't have to pay money out of their wallet and then go through the process of submitting a claim for the 100 percent covered shot."

The other option, Hutchings said, is for the member to pay the pharmacy upfront for the shot, then submit a claim to Aetna for reimbursem*nt. At a doctor's office, the doctor would submit the claim for the flu shot to Aetna.

The arbitration agreement, Hutchings noted, does not include Aetna or the participating pharmacies.

The flu card "is a popular program that saw a 33 percent increase in usage by Medicare Advantage members last year," Hutchings said.

The Flu Care card sent to Meadows and thousands of others across the state last year expired Feb. 15, but Aetna said it plans to continue the program for the next flu season because of its popularity.

You have a choice: Agree to their terms or don't use card

Tom Bedall, a managing attorney at the Roselawn-based nonprofit Pro Seniors Inc., said he sees "no nefarious purpose" in the arbitration clause attached to the Flu Care card.

"Consumer arbitration agreements have been found legal, within certain parameters, by the Ohio Supreme Court and are in use in many different consumer agreements," Bedall said, adding that even nursing homes are increasingly using the clauses in their admission contracts for seniors.

"There is a choice to agree or not to agree," said Bedall.

But whether consumers understand enough about arbitration clauses to know what they're agreeing to is up for debate.

"Consumers may open a new account or take on a new product without being aware of what the contract says or without fully understanding its implications," Cordray said.

In a report published in December, the financial protection bureau found that while tens of millions of consumers are subject to arbitration clauses, on average, consumers filed just 300 disputes in the markets studied by the bureau each year between 2010 and 2012.

The bureau is examining whether consumers are aware of the terms of arbitration clauses and whether the clauses influence consumers' decisions about which products to purchase.

For now, the bottom line for consumers remains "look past the shiny marketing materials and always read the fine print," said Laurie Petrie of the Council on Aging of Southwestern Ohio. "We tell seniors all the time, 'If it sounds too good to be true, it usually is.' " ⬛

Warning: These prepaid cards come with strings attached (2024)


Why won't websites accept my Visa gift card? ›

The retailer you're shopping with might be having server issues or technical difficulties. In this case, it's best to wait and try again, or contact them if you're having issues. Lack of funds. If your Visa gift card has insufficient funds to cover the transaction, it will be declined.

Why am I getting denied for prepaid cards? ›

There are a number of possible reasons why a purchase could be declined: You don't have enough money left on your card. You haven't activated or registered your card. The address you gave to make an online or phone purchase is different from the address you have on file with your prepaid card provider.

What is a major concern with prepaid debit cards? ›

Fees: When you use a prepaid debit card, the provider may charge you a variety of fees including activation fees, monthly service fees, transaction fees, overdraft protection fees, ATM fees, and more. These costs can add up over time and make it expensive to use this type of payment method.

What are the risks of prepaid cards? ›

Fraudsters can also use prepaid cards to carry out scams, such as card cracking or card testing. In these schemes, fraudsters use stolen or fake card information to load money onto the prepaid cards, then quickly withdraw the funds before the bank detects the fraud.

Why won t my prepaid Visa gift card work online? ›

If you have a problem using your gift card for online or telephone purchases, the most likely reason is that the merchant's fraud screening process is matching the billing information entered at checkout with the billing information on your gift card account. If the addresses don't match, the card may decline.

Why are prepaid cards not accepted? ›

Prepaid cards can be declined because you don't have sufficient funds in your account, the card hasn't been activated, the merchant doesn't accept the network's cards, or you have exceeded your spending limits. Any information you provide to the merchant must also match what's on file with the prepaid card issuer.

Why is my vanilla Visa gift card being declined? ›

The main reason why your Vanilla gift card may be declined is that it is yet to be activated. Follow the processes discussed earlier to activate your gift card. Alternatively, locate the customer support line on your gift card and contact them to process it for you.

How do I unlock my prepaid Visa card? ›

Go to the link on the front sticker or on the back of the card.
  1. If you can't find the activation website and aren't sure who the issuer is, visit Visa's prepaid gift card activation page to begin activating the card.
  2. The card issuer is often a bank or a retail company, such as Walmart or Vanilla Gift.

What is the disadvantage of prepaid card? ›

Disadvantages of prepaid debit cards

They don't help you build credit: Although pre-paid debit cards are an easy way to help you manage your money, they don't help you build credit. If used effectively, credit cards are a better option, but may be difficult if you have a low credit score.

What are the problems with prepaid debit cards? ›

Here are some of the most common charges you may come to expect:
  • Monthly fees.
  • Fees to withdraw cash at an automated teller machine (ATM)
  • A fee for not using the card.
  • Activation fees.

What is the number one prepaid debit card? ›

We rate Bluebird by American Express as the best prepaid debit card. Unlike other prepaid debit cards Bluebird doesn't charge very many fees, and the ones it does charge are easy to avoid in many cases.

What should you be careful of with prepaid cards? ›

There are only a few downsides to using prepaid cards, but they are significant. Prepaid cards come with fees. Cardholders may have a lot of fees, including activation fees, transaction fees, ATM withdrawal fees, reloading fees, monthly fees, or inactivity fees. Check the fine print on the card for fee types.

Are Visa prepaid cards bad? ›

Like other prepaid debit cards, Visa prepaid debit cards are generally considered secure. But there are some scams associated with them. For example, fraudsters may ask for you to send them money on a prepaid card to settle an account or make a payment.

Where can you not use a prepaid card? ›

Prepaid cards cannot be used for credit card payments or car payments. You cannot split payments online so you can only spend the amount that is on your card. You should keep your prepaid cards until they expire in case you receive any refunds to your cards.

Can someone steal money from a prepaid card? ›

When a customer buys the swapped card and adds funds to it, the fraudster steps in and uses those funds, via the cloned card, to make purchases or ATM withdrawals. Skimmed cards: A fraudster skims the card information from the magnetic stripe of a prepaid card in the store.

Why is my online Visa gift card being declined? ›

My gift card was declined. What should I do? Check to make sure there are sufficient funds on the card before making a purchase. If your purchase is declined and you believe the card has sufficient funds, please contact the card issuer at the toll-free number listed on the back of the card.

Why won t my Visa card work for online purchases? ›

You entered your card information incorrectly. You have an old address or phone number still on file. You reached your credit limit. Your card has expired.

Do online websites accept Visa gift cards? ›

Can you use Visa gift cards online? Yes. Because a Visa gift card functions like a credit card, it can be used anywhere that Visa cards are accepted, including online purchases—though it will likely need to be registered online or by phone prior to use.

How do I use a Visa gift card on my website? ›

You can use your card for online purchases by entering the card number, expiry date and the 3 digit code (CVV) found on the back of the card. Occasionally websites will ask for the name on the card, in these instances simply insert “Gift Card” in the field provided.

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