For decades, banks have offered their customers debit cards, which they originally called check cards. But recently, a new generation of debit cards – prepaid debit cards — are being offered by companies without traditional retail bank branches. American Express has been on the forefront of this trend, when it introduced its Bluebird card, co-branded with Wal-Mart. Now, American Express has upgraded its Serve prepaid debit card to meet the demands of the growing number of Americans who are looking for an alternative to traditional bank accounts.
While prepaid debit cardholders enjoy freedom from interest charges and debt, they are vulnerable to the myriad of fees that many of these cards impose. American Express is clearly trying to alleviate those concerns by slashing fees on its Serve card. The card is free to acquire online or at retailers through the end of the year, and $2.95 after that. Cardholders then pay a $1 monthly fee, which is waived for those who load at least $500 a month (the fee is not charged to residents of New York, Texas or Vermont).
ATM withdrawals are free at thousands of MoneyPass machines around the country, and $2 at each non-MoneyPass machines, plus any third-party ATM fees. The best part about this product may be that there is no fee for cash reloads at 14,000 participating CVS pharmacy and 7-Eleven stores. With other prepaid products, cardholders typically pay third-party networks a fee of $3 to $5 to add cash to their cards. Regular purchases do not incur a fee, but American Express imposes its 2.7% foreign transaction fee on all charges processed outside the U.S.
In order to more closely reproduce the features of a traditional bank account, American Express has introduced several new features. As with most prepaid cards, users can now set up direct deposit from their employer or government disbursement program. Cardholders can also link their cards to a savings account called Reserve, in order to set aside money for emergencies, although no interest accrues as in many savings accounts. Later this year, Serve cardholders will be able to make deposits using a mobile check capture app. Furthermore, cardholders will be able to issue payments electronically to any person or business using online bill pay. Finally, deposits will be FDIC-insured, just like those with traditional banks.
These new features come on top of existing benefits such as purchase protection, roadside assistance, emergency travel services, fraud protection in the event the card is lost or stolen, and 24/7 live customer service. Just remember that like all debit cards, Serve will not help cardholders improve their credit — a common misconception.
How Other Prepaid Debit Cards Compare
Bluebird from American Express and Wal-Mart
This product is so similar to Serve that cardholders are not permitted to have both cards at once. As with Serve, customers can add funds for free using direct deposit, but in-person cash loads will incur a third-party fee (although they are free at Wal-Mart). Although Bluebird allows cardholders to write paper checks, a checkbook fee applies. There is no cost to obtain a Bluebird card online, and no monthly fee.
H & R Block Emerald Card
Cardholders can receive an Emerald card for free at any H & R Block retail branch. Money can be loaded by direct deposit for free, but cash loads at any Green Dot network location incur third-party fees of up to $4.95. ATM withdrawals are free from Allpoint ATMs, and there is a $2.50 fee for the use of other terminals (plus any fee imposed by the ATM owner). There are no monthly fees for this card, but online bill pay costs 95 cents per transaction.
Green Dot Card
Green Dot operates the cash load networks that are used by dozens of cards, but it also offers its own prepaid debit card. Their reloadable prepaid card can be ordered for free online, or costs up to $4.95 in stores. There is a $5.95 monthly fee for this card that is waived for those who load at least $1,000 or have 30 qualifying transactions. There is no charge for direct deposit, but there is a fee of up to $4.95 to reload at the cash registers or by purchasing MoneyPaks. Cardholders can withdraw cash from MoneyPass ATMs with no fee, but there is a $2.50 fee for non-MoneyPass withdrawals.