Can Collectors Garnish a Prepaid Visa Debit Card?
If you have bad credit and cannot qualify for a regular credit card, prepaid visa debit cards are a good alternative. Consumers hiding from debt collectors are sometimes hesitant to load money onto a prepaid debit card for fear that it will be garnished. Fortunately, this fear is almost always unfounded.
How Prepaid Cards Work
I know, I know, you probably already know exactly how your prepaid Visa card works but, just for kicks, lets inform those who may not.
Your prepaid Visa card looks like a credit card, but its an entirely different beast. Rather than borrowing money from a creditor and paying hefty interest charges and fees for the privilege, the prepaid card allows you to make purchases using your own money. It's just like paying with cash.
Although sometimes referred to as a debit card (I'm guilty of doing that myself), a prepaid card is as different from a debit card as it is from a credit card. When you make a purchase with a debit card, your bank immediately deducts the cost of the purchase from the bank account the debit card is connected to. A prepaid card doesn't have the same "pay as you go" freedom. You load money onto the prepaid card, use it until its empty, rinse, repeat.
To make a long story short, a Visa prepaid card is a renewable gift card to just about everywhere.
Garnishing a Prepaid Card
Collectors everywhere would love
to be able to garnish your Visa prepaid card – but they can't. Their first obstacle in garnishing the card would be finding out about its existence. Unlike a credit card, your prepaid debit card does not show up on your credit report. Collection agencies can pull your credit report, but because the card does not show up on your credit record, pulling your credit report won't help them determine whether or not you have a prepaid Visa card. The only way they're going to find out about your account is if you tell them yourself, and you're not dumb enough to do that, are you? No? Good. Moving on.
Judgments and Garnishment
A collection agency can't garnish anything without a court judgment. Collectors obtain a court judgment by suing you and winning the lawsuit. Your state laws determine what and how much the collection agency can take, but collectors can generally garnish both your wages and your bank account – but they can't garnish a prepaid card.
Why Can't Debt Collectors Garnish Prepaid Debit Cards?
The very thing that makes prepaid cards so popular is what protects consumers from their seizure: the cards' novelty. Prepaid debit cards are a relatively new concept. As of right now, there simply aren't procedures in place for judgment creditors to garnish those types of accounts. In addition to instituting garnishment procedures, state laws would need to be modified before judgment creditors would have even the smallest sliver of hope of getting their hands on those funds.