March 12, 2009
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Prepaid Cards (101), Pt.3
Fraud, disputes and reimbursements.Again, here, there are also many other similarities and differences between prepaid cards and credit cards. First off, the term ‘lost or stolen' goes away here. Meaning, the two are not handled the same. The good news is that there is ‘zero liability loss' protection, which is standard with both VISA and MC. Your funds are protected. The ‘lost' protection is the same as with a credit card. Of course, the bad news is...you guessed it. Stolen prepaid cards and disputed purchases are handled differently than with credit cards.
Here, there is a distinction between ‘unauthorized fraud' vs. ‘disputes'. With fraudulent charges it usually an easier case to prove theft and not as complicated as it is with questions of dispute. In both cases, the money cannot be withheld as it is with credit cards. The money's already gone. The old ‘possession is 9 points of the law' comes into play here. The merchant already has the money and it can be a matter of getting that money back from the merchant. Again, if fraud can be clearly proven it's much easier. But, in the case of a dispute between the card holder and the merchant, the arbitration that follows can take a lot longer. The money cannot simply be put ‘on hold' as it is with credit cards. To boot, if there's some question about who's authorized to use the card, a fraudulent acquaintance relationship can muddy the waters.
The same is true where ‘mistakes' are concerned. If you are over-charged or double-charged it's usually a simple fix with credit cards. Not so, with prepaid cards. The money's already in someone else's hands. You now must try to get that money back. Even though you may get the same protections as with a credit card, any reimbursements can take a long time and require much greater effort on your part.