The FDIC opinion, dated November 13, 2008, says that when an employer, government agency or other organization places money with an insured institution to hold for peoples' use with pre-paid cards, the funds will be considered deposits and, therefore, covered by FDIC insurance up to the federal limit.

If the cardholder is named in the bank's records or certain other documentation, the balance on the card will be insured for the cardholder up to the federal limit. If no records identify the cardholder, any deposits at the bank will be insured to some other party, such as the card distributor. "In that case," explained FDIC attorney Christopher Hencke, "if the bank fails, the cardholder may or may not be able to recover his or her money from the card distributor. The cardholder will not be directly protected by the FDIC."

While the FDIC legal opinion also applies to small-dollar, general-purpose "gift cards" that can be used at a variety of stores and service providers, Hencke noted the ruling is "primarily of interest to people with hundreds or thousands of dollars on payroll cards or government benefit cards."

What should you do if you want to be sure the value on a pre-paid card is protected by FDIC insurance in the unlikely event that the bank holding the money fails? Contact the source of the payment and ask if its records show you as the owner of the funds.

You can find the opinion letter online at www.fdic.gov/news/news/financial/2008/fil08129.html. If you have questions about the opinion or something else involving your insurance coverage, you can call the FDIC at 1-877-ASK-FDIC (1-877-275-3342).

Consumers also should be aware that FDIC insurance coverage only takes effect if an insured depository institution fails, not, for example, if a cardholder loses a pre-paid card.