Claudia Buck

Personal Finance: Prepaid debit cards may prevent seniors from being scammed

Claudia Buck
Claudia Buck

For years, Bruce Gordon’s mother was preyed on by financial scam artists. By phone and mail, they bombarded her with bogus checks for sweepstakes “winnings,” monthly subscriptions and pleas to help their phony charities or veterans groups.

“She was a smart woman, but they sucked her in. She fell for (scams) again and again,” said Gordon, noting that con artists repeatedly “sweet-talked” his elderly mother, who lived alone and had a sympathetic ear. She routinely and unwittingly bought “cheap trinkets” online and sent checks to nonexistent charities, including one for stray dogs on Indian reservations.

His mother, who died at age 90 in 2011, was cheated out of thousands of dollars, said Gordon, a retired state education consultant.

“They were layered attacks. It was scary how well organized it was,” said the Sacramento resident, who said he and his brother “felt vulnerable” because their mother lived out of town and they couldn’t easily keep tabs on all of her spending and her accounts.

Elderly financial fraud is thriving. In 2010, the annual financial fraud loss to seniors was estimated to be at least $2.9 billion, a 12 percent increase from 2008, according to the MetLife Mature Market Institute.

“There’s a whole cottage industry of scam artists preying on seniors. There’s very definitely a market for any type of product that can prevent scam artists from taking advantage of senior citizens,” said Greg McBride, chief financial analyst for

That’s the idea behind True Link, a San Francisco-based startup that says it has an answer for baby boomers and caregivers trying to protect aging seniors from scammers. Essentially, it’s a Visa prepaid debit card that can be locked down to block purchases from unwanted sources, such as unscrupulous charities or specific stores. To protect against bogus money transfers, it can deny access to wire services like Western Union. It can also limit daily purchases to certain amounts – say, nothing over $100.

It’s the brainchild of 31-year-old Kai Stinchcombe, who launched his startup last December backed by investor funding. Stinchcombe, who has a Stanford University master’s degree in political science and one other startup on his résumé, said he was inspired to start True Link after watching his elderly grandmother.

As her eyesight failed and her gullibility increased, her grandson said, she would “open her mail and every day would mail five or 10 $10 checks. She was burning through money.”

The stigma and embarrassment, not to mention the financial loss, are hard for seniors to cope with. Stinchcombe said his True Link card is designed to give seniors financial freedom, but with limits designed to protect them from predators.

The True Link card charges a $10 monthly fee, is FDIC-insured and does not charge fees for ATM withdrawals or overdrafts. Money can be transferred from a bank account or direct deposit, such as a Social Security payment. The card “administrator” is an adult child or caregiver who sets up the account via True Link’s website and can easily adjust against what and where the card is blocked. The card itself is in the elderly person’s name and can be used like a regular Visa debit card. (For details, call 800-299-7646.)

The card is unique, according to Christina Tetreault, staff attorney for Consumers Union in San Francisco, which has surveyed the prepaid card market. “It’s the only one that has that particular focus … and seems promising to prevent fraud and exploitation.”

The biggest hurdle in using a card like True Link may be having that initial conversation with an elderly friend or parent, said McBride. “It’s always a delicate discussion whenever adult children try to inject themselves into managing a parent’s own finances. It’s easiest when an adult child or (caregiver) already has some oversight, helping Mom or Dad pay the bills or looking over their bank statements.”

In the past, prepaid debit cards were often criticized as predatory, fee-laden money traps. But that has changed in recent years, say consumer experts. “The prepaid landscape has improved a great deal,” said McBride. “Initially, they were rife with all kinds of fees.” But many of the bad ones, he noted, have been supplanted by new cards that are “lower fee, more transparent and more consumer-friendly.”

And the use of prepaid cards is growing. According to a recent Pew Charitable Trusts survey, a small – but growing – number of Americans are using prepaid debit cards. Based on a telephone survey, Pew found that U.S. consumers loaded $65 billion onto prepaid cards in 2012, more than double the amount in 2009. Many people, the Pew report said, use them to control spending, debt and fees.

And the idea of a locked-down prepaid debit card doesn’t have to be limited to seniors.

“It could be a way to prevent anybody from falling prey to suspicious (charities) or making excessive charges,” said McBride.

Like a dieter removing tempting food treats, a prepaid card that padlocks access to certain shopping habits could be helpful.

“It could be used to limit yourself before temptation arises,” said Consumers Union’s Tetreault. “If you know you’re prone to shop at QVC at 8 p.m. at night, it’ll make passing that hour easier to resist,” she said.

But, she notes, “Our fundamental advice remains the same: shop around. Prepaid cards vary greatly, so consumers should look for those that are very low fee. … Make sure they have the features you want (free ATM withdrawals, etc.) at a price you’re willing to pay.”

For Gordon, whose mother was hounded by financial scammers, the solution was similar. He asked her permission to look over her bank accounts, then put a cap on monthly debit card withdrawals from her checking account.

“Her dignity and autonomy were important to us,” said Gordon, who said the process is often “easier said than done. If you try to micromanage, all of a sudden you’re the parent and they’re the child.”