American Express Logo

As bank fees escalate, prepaid cards go mainstream

Rising fees have chased millions of people away from banks and into prepaid debit cards.

In just a handful of years, prepaid cards have become the fastest growing payment method in the U.S. Just this week, American Express became the first mainstream financial company to offer a prepaid card.

But the cards have problems of their own. Complex fee schedules. Few of the consumer protections afforded to bank and credit card customers. No ability to build credit history.

Consumer advocates are raising concerns and demanding more oversight and at least one state is investigating prepaid card issuers. The Consumer Financial Protection Bureau is expected to step up oversight of the industry when it launches in July.

"People are using prepaid cards as checking accounts and the government ought to regulate it similarly," says Suzanne Martindale, staff attorney for Consumers Union, a nonprofit advocacy group that is concerned about unfair prepaid card fees.

Even so, Americans spent $140 billion using prepaid cards in 2009, according to the latest data available from the Federal Reserve. That's a 21.5 percent increase each year over four years. The amount of money loaded onto the cards is expected to reach $552 billion in 2012 from $330 million three years ago, according to the Mercator Advisory Group, a research firm.

Prepaid cards have gone mainstream by catering to the ranks of the unbanked — people who don't have a bank account. Nearly one in five Americans are unbanked, a 2009 government report found, and the number is growing.

Prepaid cards can be used to pay bills or buy merchandise in the same places a bank-issued debit card can be used. So it's no wonder prepaid is the fastest growing method of payment over the last five years. This year, the IRS issued tax refunds on prepaid cards to about 600,000 bank account-free households. Social security payments for the unbanked have been loaded onto prepaid cards since 2008. And a growing number of small companies pay employees using the cards. On Tuesday, American Express joined the fray. The card giant launched a prepaid card in an effort to expand its customer base.

Most new prepaid card customers are seeking refuge from new and escalating fees, consumer advocates say. Among them: $3 to print an account summary at a Bank of America ATM; $12 a month for checking accounts with a balances below $1,500 at Chase and Bank of America; overdraft fees of $35 that most banks charge.

AmEx Logo Shows Up on Everything From Flip-Flops to Ice Cubes at ...

Rolling carts stacked with 1,000 white flip-flops with the blue American Express logo flanked the entry to the opening party for the Delta Air Lines Global Sales Conference at the Walt Disney World Swan and Dolphin on Monday night. As the 850 guests arrived, they swapped their shoes for the flip-flops and headed out to the party set up around the Swan’s pool and beach. There, they saw more renditions of the brand’s signature blue square logo everywhere they looked: on bar carts, furniture, pillows, balloons, a sand sculpture, swizzle sticks, ice cubes, and even on the side of the Hummer used as a DJ booth by Mix on Wheels . “This is all about making sure every one of these people knows we are a partner with them. We are their single largest distributor,” said Jeff McMenamin, manager of global supplier relations for American Express. “The flip-flops are a way for us to say, ‘Be comfortable tonight, have a good time,’ and it’s also a more intimate gift than a T-shirt or hat.”

The flip-flops also came in handy as guests made their way onto the sandy beach, where Ice Magic had set up round and octagonal clear acrylic tables and white leather lounge furniture embroidered with the American Express logo. Christina Dix, program manager of global meetings and events for Delta Airlines, said they came up with the theme of “Fire and Ice” as an alternative to typical beach parties. “I knew I didn’t want tropical or Caribbean or South Beach. We wanted something different and modern,” she said.  

The party, produced by Houston-based Elias Events , incorporated fire and ice in a variety of ways. Some of the clear acrylic tables from Ice Magic were topped with spherical ice centerpieces with candles inside. Every table had a wireless LED light inside the base that glowed either blue or orange. Shortly after guests arrived, two performers from Fear No Ice used electric saws and other tools to carve a large block of ice into event’s logo showing flames and the American Express logo. Another entertainer performed a variety of juggling tricks with fire.  

Several specialty cocktails also went along with the theme. A tequila-based drink called Burnt Orange included an orange slice caramelized on site by bartenders wielding mini blowtorches.

Brand slam, the ultimate hit in the game of marketing

The original American Express logo was a horizontal blue bar with the company's brand name appearing in black type inside the bar. ...

Paying with plastic, the digital revolution in buying and borrowing

This nonexclusive licensing agreement authorized Banco Popular to issue a card that (because it bore an American Express logo) would be honored by American ...

Europe for Dummies

Consider Amex. American Express is accepted at fewer locations than Visa or MasterCard, but an Amex card will always work where the Amex logo is displayed. ...

Branding, a guide for your journey to best-practice processes

Integral to American Express' strategy are its “Blue Box” values. These key values (which get their name from the American Express logo encased in a blue ...

A Compilation of 8 Historical Essays

American Express has the blue box card logo and the centurion emblem, Visa has the blue and orange card logo and the bird hologram, and MasterCard has the ...