Behold The Amazing Disappearing Prepaid Debit Card

It seemed like a good idea at the time. When Jim’s wife received a bonus at her job in the form of a prepaid debit card from the First National Bank of Omaha, they chose to put it away for an emergency. What they didn’t realize is that prepaid debit cards combine all of the arbitrary fees of banks with all of the general crappiness of a gift card, only worse. Much worse. By the time the couple went to use the card, the entire balance had been gobbled up by fees. Fees levied for not using the card.

Two years ago, my wife was surprised when her workplace issued bonuses not as a check, but as a debit card. It was basically one of those nice disposable cards that you call to activate, then spend as if it were a normal debit card. We checked the back of the card for the note that fees apply “after activation.” That settled, we set the card aside for when we might need that money, since the terms on it were quite clear that we accrued no fees until activation. The expiration date on the card gave us several years, so we decided that bonus money would be used in the case of an emergency.

Fast forward 1.5 years to two months ago. Family emergency erupts, requiring lots of plane travel and whatnot. Time for that card!

I pull out the card from our secret storage spot and verify the expiration. Still two full months, yay (and whoops for letting it go that long)! I call the activation number…and get a “line has been disconnected, call this other number” recording. Well that’s scary. I call the new number…get a busy tone. Repeat this about a hundred times over the next few weeks, sometimes getting through and then disconnected.

Finally, on 10/6 I get through (but the card expired on 10/1…) to explain to someone what has happened and see if I can just get the card reissued, given the expiration date. The rep confirms the amount on the card–which is still the original amount, with no service fees, as expected–and says they’ll happily reissue with a $20 fee for the new card. I agree, but she says that I need to call on Monday, as only a manager can reissue.

I call back on Monday the 10th and am told that they will not reissue the card under any circumstances. They tell me that they have seized the value of the card and I will not be allowed to have it back. After about half an hour of polite arguing, I am told that they will reissue the card for $25…and a per-month fee of 5-10% on the original value dating back to original issue date (20 months ago). Yes, that means they will send me zero dollars, if I’m willing to pay $25 for the honor.

At this point, I explain that I will not pay $25 to recoup zero dollars out of the hundreds that was on the card a week ago. I asked how they could justify seizing the money that had been issued to my wife by her employer, especially when the only reason it passed the expiration was the fault of their system. The rep (a manager, I might add) explained that they are in Nebraska and there are no usury laws there…as such, they are under no obligation to allow me access to our money, and they can change the terms of the agreement as often as they like, up to and including a 100% “maintenance fee.” They went on to state that if i don’t like it (yeah, I really don’t), I can drive to Nebraska and talk to their lawyers, as that’s the only way I’ll see a penny.

Not the best customer service I’ve ever seen.


Edit Your Comment

  1. SkokieGuy says:

    And exactly what happened when your wife spoke with her employer?

  2. dolemite says:

    Sometimes it sucks we don’t live in the old west, as I would have strapped my Winchester to my horse and loaded my 6 shooter and thundered across the plains on my horse to have a word with those lawyers and bankers. In our “civilized” world, it’s perfectly fine for banks to steal your money, but you’ll go to prison if the situation was reversed! (Even if you tried to steal your own money back from them!)

    • Hotscot says:

      Exactly. That’s what’s missing in this country now…Justice!

      Oh yes there’s “agreements” and “contracts” but for some weird reason they seem to favor the corporation against the consumer.

  3. SteveZim1017 says:

    I picture these people as the guys on the Capitol One rewards commercials.

  4. Herbz says:

    …Why didn’t they just activate it and take all the money out of it when they got it?

    • El_Fez says:

      Not wanting to fall into the Consumerist Meme of blaming the OP – but that just seems common sense. Above and beyond any hidden fees and whatnot, why would someone keep it in the bank and earn some interest?

      “But it’s for an emergency!” they cry.

      Then exercise some self control and not spend it. Pretend it isn’t in the account. When you balance your checkbook, just subtract the thousand dollars before you get to the real math and call it good.

      • ballistic90 says:

        I have to agree. I don’t like blaming the OP, but the few times I got a prepaid debit card I tried to use it as fast as possible so I wouldn’t have to deal with the fees. I don’t care what the card or contract says, there are fees associated with it. How else do they make money?

        Assume that every company is trying to make money off of a product and just try to play it by their rules to maximize your benefit from it.

        • RvLeshrac says:


          They make money by lending out the money you leave with them. That’s how every financial institution is designed to work.

          In this case, you pay them for the card, pay to have it loaded, and then they invest the money until you withdraw it.

          Where do people get this retarded idea that financial institutions can’t make money without fees? They’ve pulled down what, $250bn this year purely on interest from the Fed?

          • Fineous K. Douchenstein says:

            Yes, that’s exactly how banks originally worked, until they found out that they make exponentially more by charging fees on top of that interest. Now banks don’t work that way, because it doesn’t make enough profits to keep shareholders happy.

    • whgt says:

      Agree. This is completely stupid. Just use it right away on gas or groceries or some kind of gift card to a store you go to a lot.

    • dolemite says:

      That makes sense but…if someone told me the card had no fees and it had x expiration date…why would I be in a hurry to go through the hassle of cashing it out when I didn’t need it?

  5. Blueskylaw says:

    These charges/fees should be illegal on these cards. In the real world I wouldn’t expect companies to charge me for the priviledge of loaning them money, but somehow they get away with this bullsh*t. With that said, if you ever get one of these “scam” cards, cash it out as fast as you can and THEN put the money away for an emergency.

    Benjamin Franklin was right when he said: A bird in the hand is worth two in the bush.

  6. Loias supports harsher punishments against corporations says:

    Prepaid ___ = use immediately.

  7. SweetJustice says:

    Why wouldn’t you take the money immediately? These cards are notorious for fees and a lack of customer service.

    The OP definitely got screwed but this seems like a really naive way to put away money.

  8. DarrenO says:

    I am confused, OP got a disposable debit card “two years ago” where the expiration date gave them “several years” to use it but now it’s 20 months later and it has expired? The math just doesn’t add up. Nor does the concept of putting that kind of card away for a rainy day. Better to immediately get the cash and put it in your “secret storage spot” as cash doesn’t expire.

    Maybe I’m wrong here, but it seems to me that the OP let the card expire and then decided to make up a good story and try to have the bank reissue the cash even though they’re under no obligation to do so since the expiration date, in fact, had expired.

  9. iluvhatemail says:

    file small claims in your city, get a default judgement

    • Such an Interesting Monster says:

      You generally can’t do that. If you sue a business you have to file the claim in the state where the business resides. In this case, Nebraska.

      • RulesLawyer says:

        Incorrect. You can sue a business in a jurisdiction in which they do business. However, check the contract, because that will frequently contain a “choice of law” clause. If you live in Illinois, and the company does business in Illinois, then you can sue in Illinois, but Nebraska law may apply.

        And if there’s an arbitration clause (and why wouldn’t there be, if it’s written by the company), then suing might not be an option.

        • Such an Interesting Monster says:

          IANAL, but this is what I’ve previously read on the matter:

          If they are an out of state business they must have a presence in your state in order for you to sue them in your state. Otherwise you have to go to their state. It doesn’t seem like this company has any presence outside of Nebraska given the nature of the business, but I guess you’d have to do some research to know for sure.

          • RvLeshrac says:

            “-the business does regular business in your state by selling products or services, employing a sales rep who calls on you personally or by phone to solicit business, sending you a catalog to solicit your business, or placing advertising in your state’s media.”

            Do they sell bank products in the OP’s state? Then the OP can sue them in that state.

  10. DePaulBlueDemon says:

    Why wouldn’t you take out the funds and place them in a savings account?

  11. Bsamm09 says:

    Why would they give the bonus like this? You are already cutting payroll checks, just add it in there.

    • K-Bo says:

      I get the feeling that in order to sell these high-fee cards, banks are giving companies a deal on these cards, something like buy 100 $100 cards for $900. Then they make up the missing $100 and some in fees to the end user. Company and bank win, person who got the bonus looses.

    • Jillia says:

      My company did something like this once. It was a loophole around paying insanely high taxes on bonus checks. We got $100 cards that were equal to a weeks pay rounded up (if you made 450/wk for example, you got 5 $100 cards). They were a little bit of a pain in the butt to use, but a small price to pay to not fork over almost half your bonus to Uncle Sam. I used them for things like gas, groceries, and once in a while maybe a little shopping treat, but took the cash I would have used out of my paycheck and put it towards my savings.

      • Jillia says:

        Actually now that I think about it, they were gift cards, not pre paid debit cards. Similar concept though.

        • MrEvil says:

          Still, it’s payroll tax evasion. Last year my company gave every full time employee a 16GB Wi-Fi iPad, MSRP $500, they reported the gift to the IRS but also gave enough money in addition to cover the payroll and income tax. Essentially we got a third pay stub that month that was $0.00 but had Federal Withholding and FICA/Medicare on it.

      • fadetoblack says:

        Had your company researched this practice, they would have found that the IRS has repeatedly determined that gift cards given to employees are fully taxable as ordinary income.

        No minimum dollar amount has ever been ruled on – the current policy is that to the IRS gift cards are the same as cash. All ordinary tax withholding is required when these are given to employees; our payroll department always had to do the calculations to “gross up” the employees’ pay to cover the taxes on the gift.

        Actual de minimus gifts like a holiday turkey etc. are not deemed taxable income. $500 worth of gifts cards given to numerous employees to deliberately avoid tax liabilities could be deemed employment tax evasion, just like paying someone cash under the table.

    • aloria says:

      My last employer did something like this for “on the spot” bonuses– it was basically a way for management to throw you a couple hundred bucks right then and there without having to submit stuff to HR, wait for the next pay cycle, etc. They’d basically have a pile of prepaid cards they could hand out at their discretion.

  12. JoeDawson says:

    I got one of these for a health survey… I spent it IMMEDIATELY instead of the cash I would have spent anyway at a wedding. That way, I CONVERTED IT INTO CASH as i obviously need to spend money to live.

    • nicoleintrovert says:

      +1 This is what I have done with them as well. Throw the $50 or whatever into my savings and then use the pre-paid for my every day expenses until it’s used up.

  13. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    My husband’s company likes to give these stupid things as “bonuses”. There’s always a long list of restrictions, fees, and other nonsense, like if you don’t use all the money within X months, they start deducting $5 or $10 per month, recharge fees, and on and on.

    If he gets one, I use it to pay a bill online, like the car insurance or pay for fuel oil, so it can be used in one fell swoop and we don’t have to worry about fees.

    I would never, ever tuck something like this away for an emergency. It’s not worth potentially losing some or all of the money.

  14. PsychoRaven says:

    I have to agree. They should have activated it from the start and just pulled all that money off and put it into a savings account. Common sense should tell you that if a business can find a way to screw you out of your money they will. Sure enough they did and now the OP is screwed.

    • steal_this_book says:

      Pretty often, prepaid cards are only good for purchases and drawing cash would be subject to pretty hefty fees. It’s possible that the OP actually didn’t have many opportunities to use the card in a single swoop, and rather than activate it and immediately start incurring the monthly fees written on the back they decided to set the card aside until they had the opportunity to use the full amount.

  15. longfeltwant says:

    Sounds like a crime. Call the AG and your state rep. If it’s not a crime, it should be.

    Some states have “abandoned property” laws where the state gets to keep the abandoned property. Some states have tried to apply those laws to precisely this situation. See if you can get some relief using important people as a lever.

    • RandomTech says:

      Doesn’t apply when it’s a bank. Only applies when it’s a business…at least that’s what the state tells me.

  16. RandomTech says:

    SkokieGuy: Employer is “taking it seriously and will look into it.”

    90% of you: Yes, we should have cashed it out. Big “duh” on our parts, but the employer assured us until we activate it we’re fine. Naive…absolutely.

    DarrenO: Thanks for jumping on the blame-the-op bandwagon. Someone had to…it’s obligatory. :-) The math is as follows. Company gave out card in December 2009, but had pre-ordered them (shaving a few months off our total duration, setting it at 10/1/11). We began attempting to activate around August 5th. Their activation line failed to work from then until 10/10/11. The 20 months was a typo and should have been 24 months.

    And in better news, the employer stopped giving these out immediately after this card was issued because of other “unnamed issues.”

  17. MJDickPhoto says:

    now with the mail in rebates that give the prepaid Visa, first thing I do is go to walmart and buy the EXACT amount on a gift card. they are pretty good with their cards and have even reissued a missing one before, as well as being able to buy more smaller gift cards with that if a gift is needed to be given.

    • sponica says:

      the mail in rebates I’ve gotten have allowed me to log in to the rebate card and transfer the money to my checking or savings acct

  18. Kingsley says:

    After all that phone tag hassle I’d make one more hassle: Make contact with the AG of Nebraska. The state might not like being used this way. I also doubt that the company is even in Nebraska, they seemed way too gleeful to ‘share’ that information.

  19. aloria says:

    In my mind, keeping an unactivated debit card squirreled away in a drawer for an emergency is about as smart as doing the same with an envelope of cash. Even if I were completely confident the card would work when I needed it, there’s always the chance I’ll misplace the damned thing.

    • elangomatt says:

      Actually I think keeping an unactivated debit card squirreled away in a drawer is a much WORSE idea than doing the same thing with an envelope of cash. The cash would still work even if it took you 10 years to find the envelope, but the debit card only has value if everyone keeps their promises that the money will still be there when you are ready to use it.

  20. Cooneymike says:

    Usually I am a big fan of using small claims against companies. However, here…

    All of these are affirmative defenses that the company will have to plead in court, or potentially through a local attorney and motion, so the prospect of a default judgement is real. BEWARE though, some contracts have attorney fee provisions so if the bank wanted to call your bluff and actually hire an attorney they could probably win the case based on contract language establishing court jurisdiction and get a judgement for attorney fees against the OP.

  21. KyBash says:

    I find it hard to blame the OP because they did check the terms on the card, and it looked like it was a safe way to go.

    I just can’t see myself doing it their way. My emergency stash was always gold coins — it’s cash-in-hand as far as never losing all their value, but converting them into folding money was always enough of a hassle that it’d take a real emergency for me to do it (I’ve never lived in a town with a decent coin shop that’d give you the real value).

  22. Southern says:

    If having the cash burns a hole in your pocket (IE, you’re more tempted to spend it), then cash the card out and buy some American Express Travelers Checks with it or something. Most banks will offer these fairly cheaply (or free, in my case, but it depends on what type of account(s) you have at the bank), then put the CHECKS away in your secret hiding spot.

    They don’t expire, and you can cash them back in at your bank whenever needed.

  23. MrObvious says:

    Fools and their money….

  24. SmokeyBacon says:

    Ok, here is my 2 cents on this – although they hadn’t called to activate the card themselves, when you purchase cards (at least when I have purchased them at places like the bank or grocery store) to give as a gift, it is activated when you make the purchase. Could it be that is the activation they are referring to on the back of the card? I had always thought that was the case (and this seems to confirm that fact).

  25. ancientone567 says:

    It is horrible what happened but common sense would tell me to cash out the card the ATM asap. I cannot even fathom why one would not have cashed it out right away. You cash checks right away right? The cash would have gone right in my safe or into my portfolio to make me more money. Stupid does not win the day :(

  26. J-Mac says:

    Wow – the Consumerist Loyal here sure have become elitist. Just blame the victim for being “stupid” because you all apparently know too well that makes it perfectly OK to screw them.

    What a bunch.


  27. cheezfri says:

    Slight change of subject: When my family went to Disney World several years ago, we had unused days on our multi-day pass. When we went again last year, we took the old passes on a whim. Imagine our surprise when they were still valid! Unfortunately they don’t do that with new passes any longer, unless you pay a hefty fee for a “no-expiration” option.