Chase Latest Issuer to Offer Prepaid card
JP Morgan Chase is the most recent issuer to enter the prepaid market.
Today, Chase announced it will test a reloadable prepaid card called Chase Liquid in approximately 200 branches, and if successful, will roll out the product nationally this summer.
Chase, the largest U.S. lender in terms of assets, enters a market that is growing in popularity. According to Javelin Research, prepaid use grew 18% in 2011 compared to 2010. In June 2011, American Express introduced a prepaid card, as did financial advisor Suze Orman this January.
Historically, two of the drawbacks to prepaid cards are the high fees associated with their use and the inability of the cards to help consumers build their credit scores.
Chase Liquid has a flat monthly fee of $4.95. Customers will not be charged for making withdrawals and deposits at Chase ATMs and branches, for checking their balance or for speaking with a customer service representative.
Many prepaid cards are marketed to unbanked consumers or those that have damaged credit. Now major issuers may be entering the market for another possible reason.
When the Durbin Amendment went into effect in October, banks suffered a severe revenue loss since the interchange fee that retailers have to pay on debit card transactions was basically cut in half. Banks have scrambled to come up with other revenue streams to make up for this lost revenue. A number of major card issuers are turning to prepaid cards. One reason could be that the interchange fee on prepaid cards is not controlled by the Durbin Amendment.