Beware of prepaid ‘credit cards’

Susan
Susan Flanagan
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Regulations still fuzzy for money cards with expiry dates

— Photo illustration
by Thinkstock

No. 1 recently returned home from an engineering workterm in Calgary. He bought a car while he was out there and drove it back.

Because he wanted to be able to book hotels while he was on the road, he needed some sort of credit card in his wallet. He opted to purchase a Canada Post Visa prepaid card issued by the Citizens Bank of Canada.

It seemed like the perfect option. Simple: just transfer money from his bank account using his bank card right there at the Canada Post counter and all his problems were solved. He wouldn’t arrive at a hotel to find his reservation had been given away because he didn’t have a credit card number.

Was this a good choice?

Well, I guess first you have to look at what a Canada Post Visa prepaid card really is.

It’s not a credit card. “This card is not a credit card,” it says right on the back.

And because it has a clear expiry date printed on the front — two years after the date of issue, it can’t be a gift card. Because didn’t the provincial government rule that gift cards are not allowed to expire?

Indeed, Vanessa Colmann-Sadd, at Service NL, directed me to assembly.nl.ca where section 106 of the Consumer Protection and Business Practices Act specifies:

“‘Gift card’ means an electronic card, written certificate or other voucher or payment device, including a gift certificate, that has an express or implied monetary value and is issued or sold in exchange for the future purchase or delivery of goods or services”

That sounds like a description of what No. 1 purchased. Yet the Act goes on to say:

“Expiry dates prohibited

“3. (1) A supplier shall not issue or sell a gift card that has an expiry date.

“(2) A gift card which is issued or sold with an expiry date is redeemable as if it had no expiry date.”

So, No. 1’s Canada Post Visa prepaid card is not a credit card and it’s not a gift card.

So, what is it? I don’t know, but whatever it is, I know that in order to use it you have to pay several fees.

“Beware virtual money,” says Al Antle, executive director of the Credit Counselling Services of Newfoundland and Labrador. There are often strings attached.

Antle is right. The VISA prepaid card costs $15 to load, has a fee of $3 at the beginning of each month and $2 for every cash advance (plus any ATM fees). My son can add $500 to the card at a time, but each time he loads money he gets dinged another $3. No pin or signature is required, so if the card is lost or stolen, he can more or less kiss that money goodbye.

Here’s what the Canada Post site warns: “If the card is lost or stolen, you must notify us immediately by calling 1.866.760.1543 and provide your name, the card number, date of expiry, original value and recent transaction history to us. Keep a secure record of the card number, date of expiry and your transactions separate from the card.”

Canada Post does not issue paper statements — they are not an option — and my son may not look at his Visa prepaid card account for months. So, unless No. 1 is vigilant and reports the illegal use of funds immediately and has a copy of his card number, expiry date and transactions, he’s out of luck.

So, my next question was, why does the Canada Post Visa prepaid card, that is not a credit card nor a gift card, have to expire? I figured the best people to call would be at Canada Post.

“We don’t make the rules,” the telephone responder told me.

“Who does?” I asked.

“I can’t answer that.”

Then I got her supervisor, Carla, and although I explained I had general questions concerning the card, she wanted to speak to my son so he could give me permission to talk about his card.

“What actually happens … is that the card — the plastic — will

expire. … We are giving you a time period to use the funds. I do not know how to explain it. We give you a new plastic … By the end of April 2014, a new card will be created and sent to you and after creation of the card is completed …”

The explanation was difficult to follow. I found a more satisfying answer in the FAQ section of the Canada Post website.

Must be active

“Thirty days prior to the expiry date on the front of your card, if your card is active and has funds remaining, you will automatically be issued a replacement card with a new expiry so you can continue to use your funds. Your card will not be replaced if 30 days prior to expiry, your card is not in an active status and/or has a zero balance.”

Lorraine Wilson, media relations representative with Vancity media (which represents Citizens Bank of Canada, the issuer of the cards) says otherwise.

“For the reloadable card (I assume here Wilson is referring to the Canada Post Visa prepaid card) we return funds to the registered cardholder via a cheque on their request.”  

So, let’s review.

The onus is on No. 1 to make sure his current address is on file and is up to date and that he remembers to request a cheque for unused funds. Oh right, and he has to make sure his account is not inactive. I wasn’t sure what “inactive” meant, so I called back the number on the card and spoke to Mia. It was like pulling shark’s teeth, but I finally got a definition out of her.

“The definition of ‘inactive’ is you haven’t used the card in three months?” I asked.

“Correct,” she said.

James Nesbitt, communications consultant with Vancity adds, “If there are funds on a card that has been inactive for four months or more and the card holder doesn’t request a payout on the remaining balance, the only transaction that would occur is the monthly $3 admin fee; the balance of the funds remain untouched. Once the balance on an inactive card reaches zero, the $3 admin fee ends.”

Clear as the oily sludge I poured out of my lawnmower yesterday. They continue withdrawing your money until there’s none left.

Then I decided to ask how much Vancity has accumulated in unclaimed funds from expired Canada Post Visa prepaid cards.

“This isn’t something we typically share,” wrote Karen Chen, manager of Payment Solutions with Vancity.

I decided to call the federal government to hear what legislation they have concerning expiry dates on cards like the Canada Post Visa prepaid non-gift non-credit card.

“Prepaid card regulations are not yet final or enforced,” said Julia Howser with the Financial Consumer Agency of Canada.

Howser put me on to David Barnabe, senior media relations and consultations officer with the federal Department of Finance.

“The government is working to bring forward the final regulations for publication in the Canada Gazette in the coming months.”

So, there you have it, folks. Beware virtual money, especially for children. And if you have a complaint about Canada Post prepaid cards, you can go online (www.citizensbank.ca) to engage in Citizens Bank’s dispute resolution process.

Or you can write a letter and send it to:

Financial Consumer Agency of Canada

Enterprise Building

427 Laurier Avenue West,

    6th Floor

Ottawa, ON, K1R 1B9

Telephone: 1-866-461-3222

(en français 1-866-461-2232)

Website: fcac-acfc.gc.ca

By the way, No. 1 had a choice between buying the Canada Post Visa prepaid card over a Canada Post prepaid Visa gift card. But since Canada Post advertises: “Get a reloadable Visa prepaid card for yourself or a Visa gift card for friends and family,” he went for the prepaid card. Had he chosen the Canada Post prepaid Visa gift card, there would have been “no monthly fees” and “funds NEVER expire.” But there would be a different fee structure for uploading money.

Susan Flanagan can  be reached at susan@48degrees.ca.

Organizations: Canada Post, Citizens Bank, Service NL Vancity Credit Counselling Services of Newfoundland and Labrador Financial Consumer Agency Payment Solutions Department of Finance Canada Gazette

Geographic location: Calgary

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Comments

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Recent comments

  • James T.
    April 04, 2014 - 07:27

    The "hostile, holier-than-thou" attitudes of the commenters on here are simple to explain. They're almost all industry shills. Companies, governments, any group with an agenda now has armies of these lowlifes trawling the internet posting under fake accounts to advance their employers' interests. They definitely outnumber pure basic internet user commenters, by a sizeable margin now. In the comments here, the BMO/Mastercard bashing makes it all the more obvious. These shills are everywhere and are disgusting. Closer to subhuman more than human. That said, to the author and site: I found the article actually quite excellent and helpful. I was thinking of using one of these cards and this has given me some needed real caution, thank you!

  • Michelle
    November 11, 2013 - 15:39

    "...and my son may not look at his Visa prepaid card account for months." And whose fault is that? Would he go months without looking at his bank account? If he had a credit card, would he go without looking at that account for months? Maybe these cards *aren't* the best choice for everyone, but if you have half a grain of sense and keep track of it the same way you would a credit card or debit card, you're fine. But if you're the type of person who's completely careless about keeping track of what's going on in your account (whatever type of account you might have) then maybe you're better off just dealing in cash.

  • Business Loan
    September 11, 2013 - 06:54

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  • Jack F.
    August 23, 2013 - 18:14

    I don't understand the hostile, holier-than-though attitudes of the commenters here. For bettor or worse, these types of cards are becoming ever more popular, and no one seems to have a handle on the details, including the sellers. It would be practically useless to say "stay away from prepaid credit cards" without providing some context. Very interesting to see the confusin and lack of consistency between the various companies involved.

  • writeme
    June 05, 2013 - 23:29

    You must be very wealthy to be able to complain about this. I had a Bank of Montreal account with a BMO prepaid Mosaik Mastercard attached for 4 years. The BMO prepaid Mosaik Mastercard caused me no end of embarrassment, was not accepted online in most places, stores refused it, fearing "fraud". It never worked when I needed it, it froze my own cash on my card by surprise (if you wanted to spend $10, you had to deposit $20 as "security" which is lunacy), it had no online access, and I finally cut it up! Also, I paid $4.00 a month in fees to BMO, who had NO ATM where I live (after I moved, new place was no longer walking distance). I got socked multiple $2.00 or $2.50 withdrawal fees every time I touched my own money on BMO's own Interac card in a non-BMO ATM, and a fat penalty of $2.50 by BMO for not using their ATM. The alternative was $6 in bus fares to go to BMO! Not much of a choice. Pay ATM or pay Bus fare. The only 2 times I wrote a check, BMO f--d it up! On top of it, one day, I paid for a $450 money order, but the BMO teller wrote a $4500.00 money order & slipped it into the envelope, which I only saw when I got home. I gave it back! But BMO treated me like sh-t for 4 years, and charged me penalties because they had no ATM in my area. I dumped the account and bought an InstaCheques prepaid VISA. It costs me $7 a month plus .50c per transaction! That's $84 a year plus transaction fees. It has online account access. In comparison, Canada Post's VISA is only $3.00 a month, that's $36 a year, plus $15 first year to start up. That's a $33 saving year one, and a $48 saving per year after that. Sounds good to me! Did you ask Canada Post Visa about per-transaction fees? I saw none listed at Canada Post's site. If there are none, that's only $36 a year to use the VISA name and shop online, load funds to PayPal, use eBay etc. If there are Canada Post Prepaid Visa transaction fees, I would not switch if they came out to more than I pay now for my prepaid Titanium VISA at InstaCheques, but I think there are none. I'm looking into the Canada Post Prepaid VISA card. If I can shop online with it, load funds into PayPal, and maybe even put checks on it, I think it's a good deal.

    • Splitting Hairs
      June 13, 2013 - 20:53

      As already mentioned, the BMO prepaid card is a PITA, typical bank red tape, difficult / slow loading, refused payments both online and in store, and too many FEES!!!!!!. I switched to Canada Post prepaid card and love it, minimal fees and have used it NUMEROUS times both online and in various stores, never once with a problem. The only downside is not getting a monthly statement. and the website is not real time up to-date with regard to latest transaction / account balance.

    • Splitting Hairs
      June 13, 2013 - 20:55

      As already mentioned, the BMO prepaid card is a PITA, typical bank red tape, difficult / slow loading, refused payments both online and in store, and too many FEES!!!!!!. I switched to Canada Post prepaid card and love it, minimal fees and have used it NUMEROUS times both online and in various stores, never once with a problem. The only downside is not getting a monthly statement. and the website is not real time up to-date with regard to latest transaction / account balance.

  • Steve Kirke
    June 04, 2013 - 15:37

    Very silly and pointless article. The terms and fees for such prepaid Visas are clearly spelled out, including on the Canada Post website. It rarely makes sense to use them and they don't have the functionality of true credit cards. If a kid needs a credit card to secure reservations, etc. get a no-fee actual credit card from a real issuer, then get a free supplementary credit card on the account for him and set a very low credit limit. Pay off the balance monthly. Problem solved. Instead, the writer goes into detail on how to complain over a prepaid Visa when she should have known the terms.

    • EL_HUEVON
      April 08, 2014 - 12:11

      The Canada Post card CAN be used for reservations of all sorts. I've made reservations in Canada, US and Ecuador using this card. No problems whatsoever.

    • EL_HUEVON
      April 08, 2014 - 12:19

      The investigation and report in this article with regards to the Canada Post Visa Card is quite a lazy one. The CP card's balance is easily reviewed online. The CP card can be used no problem for all types of reservations all over the world. There IS protection from criminal acts regarding this card. Somehow someone accessed my card number in a totallly different country and used it for a purchase. This was flagged and someone immediately contacted me. Once I confirmed that I had not made the purchase, the card was cancelled and a new one was issued to me iimediately. Also, the funds in question were returned to my new account.

  • Mary Jo
    June 04, 2013 - 14:20

    Ever hear of a bank......

  • Edmund
    June 04, 2013 - 11:30

    I would be embarrassed to tell everyone that the stupid person who purchased this card is even remotely related to me let alone immediate family. Time for the Telegram to get more competent writers so their readers can enjoy more important stories. RTFM

  • Simple solution
    June 04, 2013 - 10:44

    Don't buy one !!!

  • P
    June 04, 2013 - 08:33

    This is a case of someone who did not read the terms and conditions before signing for and purchasing a prepaid credit card. I have, until recently, depended on a prepaid card for many of the luxuries in life. A credit card is essential for any type of travel and it is hard to travel without one. I knew how to use my prepaid so there was no issue for me. I figured out how much I was going to need and loaded it plus the cost of the load fees that exact amount right before I used it. I did not carry a balance from one month to another to avoid paying the fees associated with it. I believe that if people would stop and think, as well as understand what they are doing BEFORE they start using a service.