Users of prepaid credit cards will no longer have to worry about hidden fees and expiry dates, Finance Minister Jim Flaherty announced Wednesday.

At a morning news conference in Ottawa, Flaherty said the new regulations will help protect consumers from surprises.

Previously, prepaid credit cards had been largely unregulated, and money paid upfront for such cards could be lost if the balance was not spent on time.

The new regulations are also designed to promote more transparency of the cards’ terms, with fees to be disclosed in clear language on the outside of card packaging and no fee increases permitted without disclosure to consumers. Maintenance and dormancy fees won’t be allowed on the cards for the first year. Dormancy fees penalize a cardholder for failing to use it for a certain period of time.

The changes come as part of a rollout of new regulatory measures aimed at credit and debit transactions. Until now, the relatively new prepaid market had not been covered by such measures.

Flaherty said Wednesday’s move was part of a broader government initiative to encourage financial literacy.

“Financial literacy is and will continue to be an important national priority,” he said. “Financial literacy isn’t just good for individuals; it can have a meaningful benefit for the entire economy. When Canadian families become more knowledgeable about their finances … their personal finances will benefit and the entire economy will benefit.”

Prepaid card are often targeted at consumers who have trouble obtaining traditional credit, or as a tool for parents to give their children access to credit card services while preventing over-spending. The sector has been criticized for attempts to hide the cards’ full roster of fees, such as monthly or annual charges, activation fees, maintenance costs and ATM-use fees.

Compliance with the regulations will be monitored by the Financial Consumer Agency, an independent body under the purview of the federal government. The FCA educates consumers on financial products and oversees payment card network operators.

Businesses that don’t comply could face penalties, and consumers could be entitled to a refund if they are charged fees that are prohibited.

Flaherty said the changes were made after consultations with industry and consumer groups.

With files from The Canadian Press