American Express Prepaid Card is a Good Option for Consumers
This week, American Express introduced a prepaid card with substantially
lower fees than other prepaid cards on the market.
The card has no activation, transaction or monthly maintenance fees like
a number of prepaid cards. Consumers are able to make one free ATM
withdrawal each month and then pay $2 for each subsequent ATM withdrawal.
There is no charge for loading and reloading the card through your checking
or savings account. Consumers do have the option of loading the card with
cash at various retail stores by purchasing the GreenDot $4.95 MoneyPak.
The American Express prepaid card also offers some purchase and fraud
protections. Purchases are protected against accidental damage or theft for
90 days from date of purchases (up to $1,000 per occurrence). If your card
is lost or stolen, it will transfer your remaining funds to a new card at no
“American Express owns its payment network and charges higher swipe fees,”
says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card
Guidebook. “The new prepaid card will help American Express keep this money
in its own pocket. This is one reason why AmEx can offer lower fees to
encourage more consumers to use this card. Frequent usage means it collects
more fees from retailers.”
American Express enters this growing market at a time when issuers are
trying to generate new sources of revenue. Recent reforms and regulations
have hurt their revenue streams, and the impending cap on debit card
interchange fees is a significant blow to banks. Banks currently charge an
interchange fee of 1% to 2%, or an average of 44 cents, per debit card
transaction. The Fed has proposed capping the fee at a maximum of 12 cents
per swipe. Prepaid cards are not included in these rules, so banks can still
collect uncapped merchant fees when users swipe with a prepaid card.
Prepaid cards are a growing market, especially for consumers without bank
accounts and for those looking to build back their credit. According to the
Nilson Report, people used prepaid cards for $65 billion in transactions in
2010, up from $48 billion in 2009. The United States government is using
prepaid cards for IRS-issued tax refunds to approximately 600,000
households this year; and since 2008, social security payments for the
unbanked have been loaded onto prepaid cards.
While convenient, many prepaid cards are confusing and have many fees,
making it difficult for the average consumer to understand exactly how
much the card will really cost.
Some additional facts about the new American Express prepaid card:
* The card can be used only where American Express is accepted. Not all
ATMs or retailers accept American Express.
* All users must be at least 13 years old. Must be 18 years old or
older to purchase the card.
* It will take three to five business days to verify and load funds.
* ATM withdrawals can’t exceed $200 per week. Minimum reload
is $25. Maximum load is $2,500.
* Only the user whose name is on the front of the card can use the card.
* The card can’t be used for car reservations.
* The American Express prepaid card is not available for sale in
Arkansas or Vermont.