Banks get into
cards paid first
Chase
prepaid services called 'game changer'
Big banks are entering
the business of prepaid debit cards, as more Americans turn to reloadable
plastic as a handy alternative to checking accounts, check-cashing stores and
other financial options.
Giant JPMorgan Chase is especially aggressive. In late June, it launched Liquid, a
card that lets users load and withdraw money at Chase's extensive branch and
ATM network at no charge.
Some analysts call Liquid
a "game changer," because most prepaid cards charge for loading,
withdrawal and other services that Chase is offering free at its network.Wells Fargo also began
offering a prepaid card in March, Regions Bank has one, and other large and
regional banks are preparing or considering a launch.
The banks' motivation: to
tap the booming prepaid market and obtain new sources of revenue to offset big
losses from lower fees collected on traditional debit cards used at stores,
analysts said.
South Florida is key to
the prepaid card push, because the area hosts a wider range of banks and a
larger share of residents without banking accounts than many other U.S. areas.
About 8.4 percent of South Florida households were without a checking or
savings account, compared with 7 percent "unbanked" statewide and 7.7
percent nationwide, according to a census study based on 2009 data.
Chase sees special
opportunity for Liquid in Florida because of its extensive network of branches
and ATMs in the state, said Jon Wilk, head of product and marketing for Chase
consumer banking. It has 42 branches in Broward County, 44 in Palm Beach Countyand 309 statewide,
government data shows.
Cardholders who use
Liquid can leverage Chase outlets to cash checks, load money and withdraw cash
for free, saving handsomely compared to other cards, Wilk said.
In contrast, Wells
Fargo's prepaid card charges users $5 to load money on their card, unless they
have a Wells Fargo credit card. It charges $3 to withdraw cash at a teller, the
bank's website said.
That explains why
comparison website CardHub.com ranks Chase Liquid the best prepaid card for
consumers seeking an alternative to check-cashing stores. Liquid cardholders
pay nothing to cash checks and load cards at Chase outlets, services that can
cost $5 or more at check-cashing stores.
Still, Liquid has its
limits. The card may not lure many "unbanked" customers in low-income
areas where Chase has few outlets, said analyst Tim Sloane, of Mercator
Advisory Group in Boston.
"Liquid will appeal
more to the up-market, including existing Chase customers who want a prepaid
card for their child's allowance or for budgeting," said Sloane, vice
president of Mercator's prepaid advisory services.
Banks are tapping a
booming market they helped create. Many Americans are turning to prepaid cards
to flee rising fees on bank accounts. For instance, Chase now charges $12 a
month for basic checking, unless consumers qualify for waivers based on direct
deposit or minimum balances. Its monthly fee for the Chase Liquid prepaid card
runs less than half that rate: $4.95.
Last year, consumers
loaded about $57 billion onto prepaid financial products nationwide, up from
$41 billion a year earlier. The total should jump to $167 billion in 2014,
researcher Mercator forecasts.
So far, prepaid cards are
largely unregulated. But the newU.S. Consumer Financial Protection Bureauis
developing rules to standardize fees and make terms for the cards more
transparent for users.
