Recently, I received several prepaid cards as birthday gifts. One gift was the Vanilla Visa Gift Card, a prepaid card. Perhaps, you have heard of it or used it. Since I have written about prepaid cards in this blog, I was curious to see what was inside the Vanilla Visa package.
The Vanilla Visa Gift Card comes in an attractive, sealed package that features on the front exterior a "Happy Birthday" message and the Visa logo. The card can contain a value from $20 to $500. The back exterior of the package includes this messaging:
"IF TAMPER EVIDENT, DO NOT PURCHASE... No Fees After Purchase. Check your balance 24/7. Visit www.vanillavisa.com"
I took the above photos after I opened the package. Hence, you see the tear in the above photograph of the packaging. The back exterior also includes spaces for the gift giver to write their name, the amount of money on the prepaid card, and the recipient's name. The sealed package seems to be a nice improvement so the consumer knows that the magnetic strip on the back of the prepaid card has not been tampered with. Retail stores frequently display racks of prepaid cards exposed without packages.
Inside the sealed package are the prepaid card and the contract, called the Cardholder Agreement. I like that the product includes the contract, since users of prepaid card don't have the same rights and responsibilities as with credit- and debit-cards. Many prepaid cards don't. It is important to read the contract because it explains several key items:
- Activation and applicable fees,
- Card features and expiration date,
- How to check your card balance,
- How to make split purchases,
- How to use the card when paying for gasoline for your auto,
- Where you can use the prepaid card,
- Non-reloadable value,
- Optional use of a PIN,
- Warranties and related terms,
- Customer service information, and
- Arbitration terms
The PIN option is useful for cardholders who want that extra security. As with any payment card, it is important for consumers to know who you are doing business with. Vanilla Visa prepaid card users do business with at least three corporations -- Visa and:
"The Cardholder Agreement ("Agreement") constitutes the agreement between you, the Bancorp bank, Wilmington, Delaware ("The Bancorp Bank" or "Issuer"), ITC Financial Licenses, Inc. and IH Financial Licenses, Inc. outlining the terms and conditions under which the Vanilla Visa Card has been issued to you by the issuer... All Cards are issued by the Issuer and distributed and serviced either by ITC Financial Licenses, Inc. or IH Financial Licenses, Inc., depending upon the state or territory in which the Card was sold."
The Vanilla Visa prepaid card is issued by The Bancorp Bank of Wilmington, Delaware. The Bancorp is the holding company, and as the center image on the home page at the website says:
"Founded in 2000, The Bancorp creates customized banks for our hundreds of affinity partners, setting a new standard in financial services innovation. Today, The Bancorp remains one of the few financial service companies in the world dedicated to providing private-label banking and technology solutions for non-bank companies ranging from entrepreneurial start-ups to those on the Fortune 500."
So, companies wanting to offer prepaid cards to their customers might do business with The Bancorp Bank. As with any prepaid card, it is critical for consumers to know the terms and conditions; especially what fees apply and when they apply. With this card, there are no fees after purchase. (In my case, the gift giver paid the fee.) That is good, and the card has an expiration date. Mine expires in June 2022; plenty of time to use the $25 on it.
You can use the Vanilla Visa card only in the 50 states and the District of Columbia within the United States. The default state of the card is that it is not re-loadable; meaning you can spend only the value on the card. (In my case, I could spend the amount from the gift giver.) However, at the Vanilla Visa website, you can upgrade your card to make it a re-loadable prepaid card. I did not upgrade my card. Wise consumers will consult the website first to determine what additional fees apply before upgrading their cards to re-loadable status.
About activation, the Cardholder Agreement said:
"Activate Your Card
If your Card includes a notice that activation is required, you must activate the Card before you can use it. Please visit www.vanillavisa.com or call 1-855-904-7299 to activate your Card."
I was pretty certain that my card had been activated by the gift giver, but I called the phone number anyway just to confirm. The phone system included a message (on June 2, 2014) that card activation was not available via the telephone system. Not good. It's not good to promise something and then not fulfill that promise.
Next, I visited the website. It included a secure connection (https://) to enter the card number -- which I did. The results screen confirmed the amount on my card and that my card had been activated. That was good, easy, and fast.
I plan to use my Vanilla Visa card when dining at a restaurant. Since the bill will likely be higher than the $25 amount on my card, I will likely use the card plus cash to pay my bill -- something the Cardholder agreement calls a "split transaction." To do this, cardholders need to know the balance on their cards, and if the restaurant, or retail store, accepts split transactions. Some don't. A split transaction could also include other payment types (e.g., a prepaid card and a credit card; two prepaid cards, etc.). You get the idea.
Two images of the Cardholder Agreement (click to view a larger image):
The Cardholder Agreement stated the following:
"Some merchants do not allow cardholders to conduct split transactions... If you wish to conduct a split transaction and it is permitted by the merchant, you must tell the merchant to charge only the exact amount of funds available on the Card to the Card. You must then arrange to pay the difference using another payment method..."
So, to use a prepaid card with split transactions requires the cardholder to know the exact balance on their card. Otherwise, you risk having your card declined. There are exceptions when making purchases at retail places like hotels, gas stations, and car rental services. Those merchants may pre-authorize an amount greater than the balance on your prepaid card:
"If you use your Card at an automated fuel dispenser ("pay at the pump"), the merchant may preauthorize the transaction amount up to $100.00 or more. If your Card is declined, even though you have sufficient funds available, pay for your purchase inside with the cashier... , and how to perform a split transaction:
If you encounter problems, the Cardholder Agreement specifies how to contact customer service. If you experience unresolved problems, the Cardholder Agreement includes binding arbitration:
Any claim, dispute, or controversy ("Claim") between you and us arising out of or relating in any way to this Agreement, your Card, your purchase of the Card, your usage of the Card, or transactions on the Card, no matter how described, pleaded or styled, shall be finally and exclusively resolved by binding individual arbitration conducted by the American Arbitration Association ("AAA") under its Consumer Arbitration Rules in your state of residence at a location that is reasonably convenient for both parties. ARBITRATION OF YOUR CLAIM IS MANDATORY AND BINDING. NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM THROUGH A COURT. IN ARBITRATION, NEITHER YOU NOR WE WILL HAVE THE RIGHT TO A TRIAL BY JUDGE OR JURY."
This contractual clause means that for an unresolved problem or dispute, the cardholder must use the arbitration process specified. It also means that the cardholder has lost at least three rights: to sue, to participate in any class-action lawsuits, and to benefit from mediation. These rights may be important to you. You may find them acceptable, or not. Bankrate published this in 2004:
"Binding arbitration, a little noticed clause in many agreements and contracts, strips consumers of their fundamental rights, including the right to sue individually or join a class-action suit if they have a problem with a company. Under binding arbitration, a consumer can be forced to pay thousands of dollars upfront to pursue a complaint, travel thousands of miles to a location of the company's choosing for the hearing, argue their case before an arbitrator who depends on the company for future business and surrender such basic legal weapons as the right to discovery and the right to appeal a decision... Labeled by the National Consumer Law Center as "astonishingly unfair and undemocratic," these clauses affect millions of consumers across the country. Corporations insert them into employment and home building contracts, in agreements for credit cards, computer software and hardware purchases, and many types of loans."
And, arbitration can cost more than a traditional court trial:
"Consumers' costs for arbitration vary widely and depend on the arbitration company, the type of dispute and the cost of the proposed remedy. The American Arbitration Association offers a streamlined process for consumer disputes that limits costs, but limits your rights too. While the American Arbitration Association is an umbrella group for arbitration companies, not all arbitration companies follow its suggested rules. Under these consumer rules, there is a filing fee of $125 if your dispute is under $10,000 and $350 if it is over that amount... However, in exchange for the low filing fees and streamlined process, you must give up some of your rights... There is no contingency in arbitration. Also, these costs don't include costs for an attorney if you want one..."
According to the National Association of Consumer Advocates (NACA):
"One of the alleged benefits of arbitration is that it costs less than litigation, but frequently this is not true for consumers and employees. Forced arbitration frequently costs more than taking a case to court and can cost thousands of dollars. Individuals often have to pay a large fee simply to initiate the arbitration process. If they are able to get an in-person hearing, individuals sometimes have to travel thousands of miles on their own dime to attend the arbitration. In the end, the loser (usually the individual) often pays the company’s legal fees."
The Public Citizen website lists the banks, retail stores, entertainment, online shopping, telecommunications, consumer electronics, software, nursing homes, and health care companies that include binding arbitration clauses in their contracts with customers. If this bothers you (and I hope that it does), you can take action at the NACA website.
With the Vanilla Visa prepaid card, its packaging exterior does not seem to provide any indication of the contractual clauses. A cardholder learns about the binding arbitration clause after the purchase, and after you have opened the package to read the contract. Is this fair? Is this right? Is this legal? While this is legal, to me it isn't fair nor right. Important contract terms like binding arbitration should be stated on the exterior packaging. Otherwise, consumers are making uninformed purchases.
Also, the above three lost rights are important for consumers; especially when things go wrong with a product or service. Since technology moves forward far faster than federal, state, and local laws, differences of opinion are likely... and hence, disputes. It is not good that more corporations have inserted binding arbitration clauses into their contracts. Case law, the accumulation of court decisions by judges and juries, is the backbone of the judicial system in the United States.
While corporations have every right to limit their legal costs, that isn't always a benefit for consumers. So, consumers have every right not to purchase products and services from corporations that include binding arbitration clauses in their agreements.
While using a prepaid card may seem as easy as using cash, there are several important differences consumers need to know. Many people like the convenience of prepaid cards: you can't spend more than your card's balance, and you can avoid overdraft fees (but incur other fees). For me, cash offers more benefits without the complexities. With cash, I can't spend more than what's in my wallet, there are no overdraft fees, and no other fees (e.g., maintenance, non-usage, check balance, etc.).
In my opinion, prepaid cards are not as easy to use as cash. With prepaid cards you lose privacy because the banks, or corporations you do business with usually store and analyze your purchases. And with the Vanilla Visa card, you lose several rights due to the binding arbitration clause in the contract.
After writing this review, I did an online search to see what other reviews exist. You may find helpful the Vanilla Visa Gift Card reviews at the Consumer Affairs site.
What's your opinion of the Vanilla Visa prepaid card? Of the contract terms? If you have used this prepaid card, share your experiences below.