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How to avoid fraud with prepaid cards
MADISON, Wis. (7/16/09)--The growing popularity of prepaid cards worldwide is offering more opportunity for fraudsters and could lead to an increase in card fraud, according to an industry executive. However, credit unions can take steps to help prevent this fraud. The fraud would take place in the form of lost and stolen cards, counterfeit cards, and theft of personal identification numbers, said Mike Urban, senior director of fraud solutions for Fair Isaac, a Minneapolis-based company that produces the FICO credit scoring system (CardLine Global July 15). Travelex is a company that offers several products to financial institutions. It offers four prepaid cards through CUNA Strategic Services:
* Cash Passport, a prepaid MasterCard issued in three versions: British pounds sterling, Euros or U.S. dollars and accepted at most ATMs and merchants that accept MasterCard debit cards. Cash Passport can be reloaded up to 24 times at a credit union or by phone; and * TravelMoney Card, a prepaid Visa debit card that offers a safer and more convenient alternative to traveler's cheques and cash. Members can use Visa TravelMoney at ATMs and merchants worldwide. Members have unlimited reload capabilities during the 24-month card life; reloads can be completed at the credit union, by phone, or online.
At present, credit union travel cards are not having real problems with fraud, Clayton Ferrill, Travelex vice president of client relations, told News Now. “While the card-issuing industry as a whole generally holds the cardholder harmless for fraudulent activity beyond their control, prepaid cards are safer than credit or debit cards affiliated with a bank account or large credit limit,” Ferrill said. “This is primarily because they hold a specific amount so any damage from fraudulent activity is limited to the balance on the card.” However, credit unions can take steps to help mitigate fraud, he added. “Prepaid cards look like and can be used in the exact same way as credit and debit cards, which is one of the reasons they are growing in popularity,” Ferrill said. “Credit unions can help their members through consumer education about preventative measures that should be taken with all card products. “There is a card-not-present scenario in which the member may be using a card for online and telephone purchases,” he continued. “Cautioning members to only use secure portals when purchasing online is always recommended regardless of the card type--credit, debit or prepaid. When ordering merchandise or services over the telephone, consumers should be aware that merchants offer protections for using their credit or debit cards for purchases.”
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