Walmart and AmEx Made a Prepaid Card Baby Great

“Wal-Mart Stores is taking another leap into the banking world, announcing on Monday a prepaid card and debit account with American Express that will give low-income consumers access to features like smartphone deposits,” reports the NYT. So one good rule of thumb, a nice little tip to remember, is that financial products designed for “low-income consumers” are usually TERRIBLE and RIFE WITH FEES because THAT IS HOW THINGS WORK IN THIS COUNTRY.

Walmart and AmEx say this prepaid card is different, but ultimately, prepaid cards are unregulated so it can’t be but so great. “The only fees consumers will ever pay are clear, transparent and within their control,” says the press release. But …. right okay. The fees they’ve released so far: $5 to signup in a Walmart store (or free if you sign up online or via your phone); $2 per out-of-network ATM; $2 per withdrawal without direct deposit. So: If you don’t have direct deposit, and you use an out of network ATM, you’re paying $4 each time you want your money, plus whatever the ATM you’re using charges you. “The companies did not disclose other fees as of now.”

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8 Comments / Post A Comment

So direct deposit, withdrawals, ability to pay merchants…HOW IS THIS NOT A BANK? Seriously, can someone please explain how a business can look like a bank, act like a bank, and get out of being regulated like a bank?

Megano! (#124)

@franceschances Because life is meaningless and full of pain

@franceschances Because they don’t lend money.

Banks, in theory at least, solicit deposits so they can then lend out part of that money at interest. That’s the reason they’re able to offer services like ATMs, tellers, bill pay, etc. etc. It also means that there is some risk they could lose their depositors’ money on a risky investment.

To protect consumers, the Federal government insures deposits up to $250,000 (used to be $100,000 until the financial crisis), meaning that even if the bank loses all your money, the government will make good.

These two things, being able to lend depositors’ money, and having depositors’ money insured by the FDIC, are why banks are regulated, and these cards are not.

(An analogy might be a safety deposit box: if I go down to the FedEx store and get a safety deposit box, then fill it with diamonds, there is no government oversight of their security procedures, how thick the locks have to be, etc. Obviously in this case my contract probably includes some kind of guarantee which in turn is backed by an insurance company that will demand certain standards are met, but the basic principle is the same.)

P.J. Morse (#665)

This is the Rosemary’s Baby of prepaid cards. Yeah, payday loan companies claim to be “helpful,” too. Grrrr ….

EvanDeSimone (#2,101)

They can’t lend money and their deposits are not insured by the FDIC. Basically they’re not a bank because they haven’t asked to be by applying for a charter. They’re liable for 100% of the money they hold for their clients. Normally this might deter a company for engaging in these practices, but in walmarts case the risk is negligible because of their size. In other words they avoid being effaced because they don’t need the govt to back their plays.

EvanDeSimone (#2,101)

By effaced I mean regulated. Thanks autocorrect!

Once I started depositing my girlfriend’s half of the rent in addition to my paychecks, my bank upgraded me to Premier status, which means I get reimbursed for all ATM fees and slightly less ridiculous interest rate on my non-existent savings. “Banks! We give you more breaks the less you need them!”

TARDIStime (#1,633)

@stuffisthings
Yeah, what is that? My bank stopped charging me any fees after I started making more than $2,000 a month. Before that – ALL THE FEES!

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