Get the Facts: Walmart’s AmEx Bluebird Prepaid Card
By Consumers Union on Thursday, October 11th, 2012
There’s been a lot of noise after American Express and Wal-Mart announced their new Bluebird Prepaid card earlier this week, including many praises for its low fees and new features.
Fox News frames prepaid cards as a threat to banks, as more consumers choose prepaid in lieu of their bank accounts and debit cards. Business Week declares “Walmart’s New Prepaid Card May be the Best Deal Yet” with its low fees and added features.
While it is true that the Bluebird card will have some of the lowest fees in the prepaid card market, and provides convenience features to its users that aren’t available to many bank customers- like the ability to take a picture of your check to make a deposit- there are some key attributes that still make the Bluebird card inferior to a debit card tied to a traditional bank or credit union account. NPR’s recent story summarizes some of these points here.
1. Bluebird does not develop a relationship with a bank.
This might not be important for all consumers, but having and maintaining a relationship with a bank remains a critical to establishing your financial well-being. Bank customers will be able to point to an ongoing relationship when they need to obtain a loan. Bluebird prepaid cardholders won’t have this access. Credit Union Times further highlights this gap.
2. Prepaid doesn’t build or repair credit.
The industry and credit bureaus have been trying to determine whether or not prepaid card activity can be used to build or rebuild credit. Suze Orman’s the Approved Card’s Credit Project is one approach at making this happen, but results are not in.
3. Funds are NOT FDIC insured to the prepaid cardholder.
Funds loaded onto Bluebird prepaid cards are likely not held in a bank on behalf of the cardholders. Adam Rust at BankTalk makes an important point. “Everyone seems to have forgotten an important thing about American Express prepaid debit cards. They cannot accept a federal benefits payment.” The Deparment of Treasury found FDIC insurance important enough to make a requirement that federal benefit disbursements to prepaid cards can only be made to those with FDIC insurance.
Bottom line: there have been many accolades as to the pricing of the new Bluebird card and the features the card will provide, but there are still some fundamental differences that sets this prepaid card apart that make it an inferior product overall compared to a traditional debit card tied to a bank account.