Consumer Reports has removed our recommendation for both versions of the Prepaid Visa RushCard: the RushUnlimited Plan and the Pay As You Go Plan.
The decision was made due to problems cardholders have had using their cards over the past 10 days. Among the problems facing cardholders: They couldn't use their cards to make a payment. Even if there was money loaded onto the card, it would show a zero balance.
"These cards are marketed to people without traditional bank accounts, so immediate access to their money is critical," noted Pamela Banks, senior policy counsel for Consumers Union, the policy and advocacy arm of Consumer Reports. "Without access to their account funds, many RushCard holders report that they cannot pay bills or purchase necessities." (Read this update from Consumers Union.)
A RushCard spokesperson told Consumer Reports that although the company was able to fix the problem for most customers, others were still having trouble using their cards.
Another problem facing cardholders was that when money was deposited by government agencies or employers directly to the card, the payment was not accepted. Russell Simmons, the celebrity co-founder of RushCard, tweeted that some customers' direct-deposit payroll and government benefits payments had been returned due to inaccurate account information.
"We have put in new processes to review all incoming deposits beginning this week to ensure deposits are posted in a timely manner," Simmons wrote. "If you were impacted by this issue, please contact your employer/government benefits administrator to verify the funds were returned and either obtain the funds from them or request that they re-submit the payment to your RushCard."
Since the problems with RushCard became apparent, Simmons has encouraged customers to direct message him (@UncleRUSH) to report continuing difficulties with their cards.
"The company needs to step up fast, and until we know the problem is fully resolved, we don't recommend [these cards] to any new customers." Banks said. Consumers Union has reached reached out to the Consumer Financial Protection Bureau to urge it to look into the problem, she added.
In the meantime, Consumer Reports recommends that consumers consult our prepaid debit card Ratings for alternatives. The BlueBird card, sponsored by American Express and Walmart, is rated tops among prepaid cards that are used in addition to a bank account. Among prepaid cards used as a bank account substitute, several cards appear at the top of our Ratings, including the Bluebird card; the Chase Liquid Visa card; and the American Express Serve card. Consumer Reports last rated prepaid cards in December 2014.
Check our Ratings of prepaid cards used in addition to a bank account and prepaid cards as a bank account substitute. To be recommended by Consumer Reports, a prepaid card must be convenient, easy, and safe to use and provide good value.
Root of the Problem
On October 12, 2015, shortly after RushCard began a transition to a new card-processing vendor, customers began having problems accessing their money. On Facebook, Twitter, and other channels, customers announced their balances had dropped to zero. Many reported facing hours-long customer service waits.
RushCard and other prepaid debit cards are increasingly being used by lower- and middle-income people who are shut out of the traditional banking system. More than 40 percent of RushCard holders use the prepaid cards as bank alternatives. That means the card is a chief source of funds for day-to-day transactions including rent payments and grocery purchases. RushCard is a relatively small player in the prepaid debit card market, with customers in the "hundreds of thousands," according to a spokesman, Larry Kopp.
Kopp confirmed that issues with most accounts have been fixed, and that just a few thousand people still were experiencing difficulties. He said that cardholders were not and are not at risk for losing their balances. Metabank, the card issuer, is fully insured by the Federal Deposit Insurance Corp. for balances up to $250,000. RushCard complies with federal regulations to protect electronic funds transfers.
To compensate current customers—and arguably as an incentive to new customers—RushCard has announced that it will suspend all fees incurred between November 1, 2015, and February 29, 2016. The company also is working to return fees charged to customers while they were without access to their funds.
