In light of the Consumer Financial Protection Bureau’s recent push to update disclosures for prepaid cards, you might be wondering what these cards are and how they work.
Basically, a prepaid card is issued by a financial institution and is preloaded with money. You can use a prepaid card just
like a regular credit card. The cards differ in that you are not purchasing items with borrowed funds (such as through a credit card). Rather, your purchases are made with cash that has already been transferred onto the card. It is very similar to a gift card. However, there are many more fees. Take a look at this video produced by the Federal Trade Commission for more information on prepaid cards.