New rules crack down on prepaid cards

The regulations go into effect in October, 2017

Photo Courtesy: KIMT

(CNN) – New rules will protect consumers who use prepaid Visa or MasterCard’s.

The cards, which are similar to debit cards, are popular among those who don’t have bank accounts or can’t qualify for a credit card. Unfortunately, they often come with exorbitant fees and lack basic protections offered to credit cards holders.

The Consumer Financial Protection Bureau just laid out new federal protections on prepaid accounts that require clear disclosures, limit fees and interest rates, and increase fraud protection.

Starting next year, providers must first ensure a customer can afford the payments before opening a credit card account or increasing a line of credit related to a prepaid card. Cardholders will also have more protection if they lose or have their card stolen.

The regulations, which also apply to mobile apps like Google wallet and PayPal, go into effect in October, 2017.