Bluebird Prepaid Card by American Express: A Full Featured Checking Account That Never Overdrafts

By Harry Sit

Bluebird

American Express is offering a new prepaid card with Walmart called Bluebird. I already have an American Express prepaid card. How is Bluebird different and should I switch to Bluebird?

My American Express Prepaid Card is already pretty good. I can add money to it from my bank account. There’s no monthly fee or any other fee unless I use it to withdraw cash from an ATM, which I won’t ever do because I have my regular ATM card for that. The prepaid card is basically some isolated digital cash I can carry when I don’t want to carry my wallet. I don’t have to worry about losing the card because the temporary damage is limited to the money on the card and American Express covers unauthorized charges.

What does Bluebird add to something already pretty good?

Add Cash at Walmart

Currently you can add cash to the prepaid card via a Green Dot MoneyPak or a Vanilla Reload, both of which cost money. Adding cash to the Bluebird card at Walmart is free. This can be a good way to convert some unwanted cash into digital form. It’s a good feature for someone who’s paid cash for what they do.

Free ATM Withdrawals

Bluebird adds free ATM withdrawals from ATMs in the MoneyPass network if the user has direct deposit, which can be done by a scheduled recurring monthly transfer from a bank account. The current prepaid card doesn’t have a free ATM network. This can be useful when you are traveling outside your own bank’s territory but you can find a Walmart or MoneyPass ATM nearby.

Mobile Phone Check Deposit

This is another new feature for Bluebird. The current prepaid card only takes direct deposit and bank transfers. With Bluebird you can deposit a check by taking a picture of it with a smartphone. If your own bank doesn’t offer mobile check deposit, you can deposit the check to Bluebird before withdrawing to your bank account.

Bill Payment

Bluebird card supports bill payment just like online banking in a regular checking account except it doesn’t support scheduling recurring payments. The current prepaid card doesn’t have bill payment.

Withdraw to Bank Account

The link between the Bluebird card and a regular checking account is both ways. The current prepaid card only allows adding money to the card, no withdrawals. This will be useful if you want to draw the balance down from the card.

Sub-Accounts and Transfers

You can have sub-accounts and transfer between them and the main account. You can also transfer money from one Bluebird account to another person’s Bluebird account. Good features for managing cards given to kids.

Replace Checking Account?

The Bluebird card, and prepaid cards in general, are marketed as replacement for checking accounts for the unbanked and underbanked. What doesn’t the Bluebird card do that a regular checking account does?

(1) Checks. At this moment the Bluebird card does not allow check-writing. Someone using this exclusively without a regular checking account will have to figure out a different way if say their kid’s school program wants a check. American Express said check writing will be added in 2013.

It’ll be interesting to see how they will support check writing and still maintain the no-overdraft feature. Could it be that users will self-report the checks when they write the checks and have the amount set aside from available balance? That way the card will essentially work like an electronic check register.

(2) ACH debit. Some utilities and especially mortgage companies don’t accept cards but they will do auto-debit. Bluebird does not allow ACH debits. The alternative is to use bill payment from the Bluebird account.

(3) Use at places that don’t take American Express. Use a different card or cash at those places.

(4) Pay interest. Insignificant these days.

(5) FDIC insurance. American Express is modeling this on traveler’s checks. The money is not FDIC insured but American Express is fully reserving for it.

The prepaid card already blocks overdrafts on the card side. Check-writing and ACH debit are the remaining primary sources of overdraft. There are good reasons prepaid cards typically don’t allow check-writing and ACH debit . As long as one can use bill payment, not having ACH debit may be actually desirable for those prone to overdraft.

The feature-rich Bluebird card does look like a good alternative to a checking account for the unbanked and underbanked. For most things people do with a checking account, Bluebird can do the same, in many ways even better. Not possible to overdraft and no fees make it the best product for those who suffer from overdraft fees.

I read a report saying bank customers created average 7.4 overdrafts per account in 2011. When you take out a large percentage of customers who had zero overdraft, the average on the remaining accounts that had at least one overdraft must be much higher. In a perverse setup, those who don’t have money are footing the bill for free banking services for those who have money. For customers being dinged for overdrafts left and right, switching to Bluebird would be a no-brainer.

If Bluebird and whatever come out to compete with it are really successful in getting a large number of customers who currently supply overdraft revenue to the banks, banks will really have to charge the true cost of banking to customers who aren’t paying today. I’d rather pay the true cost than riding on the backs of those who have less.

For those with a good checking account already, the Bluebird card can be a substitute or backup ATM card, a convenient cash and check deposit conduit, a deposit-only bank account you can confidently give to others paying you, or an allowance card for kids or elderly parents. There must be some other good ways to use it I haven’t thought of.

If you want a Bluebird card, just go to bluebird.com and give your name and address. They will send you one in the mail. You add money to it after receiving the card. Don’t buy the “starter” card at Walmart; it will cost you $5 (not credited on the card).

[Photo credit: Flickr user Wade Brooks]

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Posted on November 26, 2012 under Banking and Credit Cards. Keywords: , .

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Comments

3 Comments on Bluebird Prepaid Card by American Express: A Full Featured Checking Account That Never Overdrafts

  1. Andy Hough on November 26, 2012
     

    That card sounds like a good deal for those who don’t have a checking account or have a problem with overdrafts. It is funny that some people think “rewards cards” are bad because they take advantage of those who overspend on their credit cards but they don’t have a problem with free checking accounts that are free mainly because of the money the bank makes from overdraft charges.

  2. anie on December 31, 2012
     

    I think that you would be charged a fee for adding to your account from another checking/bank account. The direct deposit fee avoidance works only for employers. Which I could look to myself to be, I suppose, but not for many.

    Wondering if this would be a good account to link to Paypal for payment purposes, to better protect more fully funded bank accounts from being connected to online shopping?

  3. Harry on December 31, 2012
     

    anie – Bluebird fee schedule specifically says “Add Funds: From a Checking/Savings Account $0.” Having direct deposit waives the ATM fee at MoneyPass ATMs. If you don’t use ATMs, it doesn’t affect you anyway. I suspect ACH debits are blocked on this. So you can’t use it as a bank account in PayPal for online shopping.

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