(US money blog): RushCard disruption reveals why prepaid debit cards should not exist at all

[unhappycamper]

http://www.theguardian.com/money/us-money-blog/2015/oct/25/rushcard-disruption-perils-prepaid-debit-cards

Thousands of customers were unable to access their money, but observers say it is the banking industry that has stopped serving those who are ‘too poor’

RushCard disruption reveals why prepaid debit cards should not exist at all
Suzanne McGee
Sunday 25 October 2015 08.00 EDT

It’s a sad truth of American life that the poorer you are the more you pay for banking. And as thousands of Americans have discovered this month, it can also be very perilous to live outside the mainstream banking system. But there may be a solution on the horizon – one unused since the 1960s.

Thousands of holders of one of the most popular prepaid debit cards in circulation, the RushCard, founded in 2003 by hip-hop mogul Russell Simmons, found themselves unable to access their funds for the better part of two weeks. Blocked from buying groceries and medication, getting hold of cash they needed to pay their rent or purchase gas for their cars, they have been venting their fury at both the card and the organization on social and traditional media.

There are certainly plenty of reasons for RushCard’s holders to be livid, especially given the initial vague response: the company blamed a “technology transition”, while Simmons himself simply said he was “praying” for those affected, in a since-deleted tweet.

But this isn’t a problem limited to RushCard. The Pew Charitable Trusts reported in June that about 23 million Americans use prepaid cards such as RushCard regularly, up about 50% between 2012 and 2014, with many treating them like bank accounts and having their pay checks directly deposited to the card. That backfired badly when those direct deposits went through, only for cardholders to find that their money is now in limbo, inaccessible.