American Express Prepaid Card: Great for Kids’ Allowance

This is an update to my previous post about American Express prepaid cards. I received the 3 cards I ordered. Although I originally went after the possible $75 bonus in gift cards, which aren’t due to arrive yet, now I’m thinking of keeping the prepaid cards instead of ditching them after using them just once on paying a utility bill.

Why? For one thing, the card looks and feels really cool. It may sound silly to judge a card by the look and feel, but there’s something to be said about visually and physically appealing products, as evidenced by the success of Apple. Just holding the card in my hand makes me think about all the hard work those American Express employees and vendors put in to create it.

The American Express prepaid card would be great for a kid’s allowance. Parents can add money to it at any time through a bank transfer. You can set up recurring transfers on a schedule and top up the balance every so often. Parents can also monitor where the money is spent. You can’t do that if you are giving cash.

There is no purchase fee, no shipping charge, no load fee, no monthly fee, and no chance for overdraft. As long as you don’t use it to withdraw cash from an ATM machine more than once per month, there is no fee whatsoever. It’s perfect for just spending the money a kid has on the card.

A prepaid card is also good for an adult when you don’t want to take your real card with you. Say when I go running I don’t take my wallet with me but I can take a prepaid card with a small amount of money on it. If I lose the card, I won’t have a big headache in changing all my automatic charges. I can still get a replacement card and dispute all unauthorized charges on the prepaid card.

What’s in it for American Express if it’s not charging fees the other prepaid cards charge?

Well first there is the fee they charge the stores, which is higher than the fee from a Visa or MasterCard prepaid card. If a kid uses only an American Express prepaid card, stores that want the business from those kids will have to accept American Express if they don’t do so now. Some adults who used to use a different card may shift to American Express when they see the store accepts American Express. In the end American Express gets more revenue from the stores. This is a classic two-sided market strategy: bribe the consumers (cool looks, convenience, no fees), charge the businesses.

Second, American Express earns some float. The prepaid balance does not earn interest. This is a minor factor today due to low interest rate in general, but it may become a more significant factor in the future. If you can change people’s habit when the interest rate is low, people may very well stay with the habit when the interest rate goes higher.

Then there’s the long-term investment in branding. If kids start using an American Express card when they are kids, they will be familiar with American Express for years already when they become adults. If they are satisfied by American Express, they will prefer to use American Express.

I think American Express did a great job in creating this product. They are able to say no to the short-term allure of fees when they go after the much larger long-term reward. That’s smart. Click on the card to learn more and get one for yourself and your kids.

Read also: New American Express Prepaid Card Is Light on Fees by Tara Siegel Bernard at NYT Bucks. Note the card graphics changed to a much cooler look now.

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  1. says

    Interesting. The only thing I can see being a bit of a headache if used for allowance would be things like split purchases. For now, if our kids want to split something like a video game three ways (we have four kids), I’ll swipe my card and then we’ll settle up with cash later. But as kids get older and more independent, I can see this being useful.

    How does ATM access work? You say that there’s no fee if you don’t do it more than once a month. I’m guessing this is on the Amex side, correct? What about on the ATM/bank side? And what if you do make more than one withdrawal in a month?

  2. says

    @nickel – Yes the card comes with a name printed on it. If you order it for your kids, it will be the kid’s name. If they are old enough to log on to websites, you can create a user name for them to see their own transaction history. Your login will see activities on all cards. They only see their one card.

    AmEx charges $2 after one free ATM withdrawal per month. Fee from the ATM/bank side would be extra. AmEx doesn’t say if the card participates in any surcharge-free ATM network (probably not). You can block off ATM access altogether. Have the kids come to the Mom-and-Dad ATM if they need cash. Either deduct the cash from the next allowance or maybe use Square?

  3. KD says

    I have been trying in vain to let credit card companies know that I would use their card more often if it was prettier because I pay off each month and the rewards programs are similar. But with Amex Blue Cash preferred the game has changed quite a bit. I get a really good rewards program, good customer service because I pay an annual fee, and a pretty looking card. I still think it could look prettier though. :)

  4. says

    I like to use prepaid cards for purchasing things like magazines, or yearly subscriptions of services I may not want after the first year. Many magazine subscriptions (and some internet-based television providers) provide the “convenience” of automatically renewing your subscription the 2nd year. This is a pain and a hassle when I’m gettting the 1st year at a steep discount.

    By using the prepaid card, they won’t be able to stick me for the full price the following year.

    Kids allowance is a good use too though. :D

  5. dd says

    Years ago Visa kept upgrading us until we called and told them we did not want the upgrade because their upgraded card was ugly. The customer service rep. had a hard time with this, but did honor our request. It’s good to know aren’t the only ones who feel that design is important.

  6. Anna Smith says

    I have got to say this! I love my Pre Paid American Express card!!! No troubles with it all!! Great Job American Express! The look and the feel of the card is amazing! I love that it has my Name printed on the front…and love that it does not have the word debit printed anywhere on the front of the card! I ROCK YOUR CARD EVERYWHERE AMERICAN EXPRESS IS EXPECTED! I would like to see a card made for kids 6 years and up. It’s never to eary to learn the value of a dollar. When it’s the parent signing up for the card and loading the cash or in parents words…”Reward” on the card it should not have a age on it. Have them learn eary, and they will have power and work harder when they are of age to have the real thing as adults.

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