Whether the money on your prepaid card is insured by the FDIC
in the event of a bank failure depends
on the card program.
For
individual bank accounts, the government guarantees you will get back up to
$250,000 of the money in your individual bank account through Federal Deposit
Insurance Company (FDIC) insurance should your bank go out of business. Credit
unions have similar insurance through the National Credit Union Administration
(NCUA) or NCUSIF insurance.
Funds
loaded onto prepaid cards are typically held in pooled (not individual)
accounts at banks or credit unions. Pooled accounts may qualify for FDIC or
NCUA pass-through insurance if they meet certain requirements. Among other
things, in order for your funds to be insured, the bank or credit union must
have information in its files that identify you.
The
CFPB’s prepaid rule also requires prepaid card providers to inform you
pre-purchase whether the money in the account is eligible for pass-through insurance.
However, due to phase-in rules, it may take some time before you start
seeing the required disclosures on card packages in retail stores. Your
cardholder agreement may also indicate whether your prepaid card account is
eligible for pass-through insurance.
