A new ruling at the beginning of this month from the FSA (Financial Services Authority) gives people taking advantage of the benefits of pre paid credit cards more protection.
The cards, often used by holiday goers who top the cards up with foreign currency and use the card on holiday, are offered by companies not protected by the Financial Services Compensation Scheme and had no safeguards against the company going bust.
Should you have topped up your card with £1000 before and the company went bust, you’d have lost your money but a new rule means the companies must keep your money in a separate account, protected should they run into any problems.
Any customers returning from holiday with money left on the pre-paid credit card were also facing high rates to get their money back, but another new rule only allows them to charge a small admin fee, which they must clearly set out in the terms and conditions when offering the card.
All cards are now to be covered by the main financial complaints body, the Financial Ombudsman Service, which will help settle any disputes.
Unfortunately gift cards are yet to be covered so customers with gift cards are still at risk.