Image via AP/American Express

American Express and Wal-Mart have partnered to create Bluebird, a prepaid card that, the AP says, “acts like a checking account but without the fees that have increasingly frustrated shoppers.” Those fees include overdraft charges and monthly fees.

In addition, the card will have some of the features and benefits that one would find with one of today’s digital accounts, like the ability to deposit a check into your account using a photo of the check and direct deposit capabilities. Banking can be done at the Wal-Mart checkout, which Amex’s group president of Enterprise Growth, Dan Schulman, called the “moral equivalent of a bank branch at retail.”

According to a Citi Research analyst, only about 15 percent of Walmart purchases are paid with a credit card, a small portion of the many people shopping at the “world’s largest retailer.” Moreover, about eight percent of Americans (17 million people) don’t have a bank account, with another 18 percent (43 million people) classified as “under-banked.” The FDIC recently found that more than one-fifth of blacks don’t have a bank account. With its emphasis on low and no fees, Bluebird provides an alternative for those people who may otherwise be paying a fortune for alternative financial services like payday loans.

Even a checking account comes with a cost. A press statement about Bluebird includes this startling stat: a basic checking account costs customers, on average, $259. (The Huffington Post puts it at $144.) Overdraft fees can take costs into the hundreds or thousands. Bluebird doesn’t offer overdraft.

For American Express, this is a turn towards a new market of less affluent customers. By targeting this new consumer, some suspect that the two companies are trying to take on big banks. But HuffPo points out that those customers who have turned away from banks have gone to credit unions. And people who bank with traditional banking institutions are unlikely to leave them for this sort of an option. More than anything, it will likely act as a gateway for many to reliable financial services.
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From TheGrio.com

What do Russell Simmons, Kim Kardashian, Lil Wayne, Tom Joyner, Suze Orman, George Lopez, and now BET have in common? They all have their own or have endorsed a prepaid debit card.

Yes…they have all jumped into the prolific market which targets working class and low income families promising to give them all the luxurious privilege of spending money to use their own money. BET has joined the ranks of those who expect people spend their money using a “glorified gift card” as they are called by John Ulzheimer, President of Consumer Education at SmartCredit.com.

The prepaid card is one that doesn’t help anyone establish credit, costs far too much for those who have limited budgets, and, because they allow those who use them to remain outside the banking system, too often insert the user into a permanent underclass of society, unable to progress economically.

BET has partnered with NetSpend (NTSP) to endorse their Control Card that promotes the following perks.

For the complete story, visit TheGrio.com.

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Radio personality Tom Joyner seems unphased by all the negative criticisms of pre-paid debit cards and how they take advantage of lower-income individuals as evinced by the fact that he’s launching his own pre-paid card called the Reach card. According to PreCash, the company issuing the card with Joyner, the Reach Card should cost about $120 a year for most users, implying that it’s far cheaper than the charges levied by other pre-paid cards.

Mia Mends, general manager of prepaid debit for PreCash, told ABC news that the Reach card was developed with Joyner’s audience in mind.  “We don’t assume all of them are unbanked or underbanked, but there’s probably some overlap,” she said. Prepaid cards do appeal to those without bank accounts because you don’t need a bank account to maintain the card.

Maybe the Reach Card wants to address unbanked African-Americans but shouldn’t leaders like Joyner consider going into partnership with banks to encourage those individuals to open an account, which would provide more financial protections and better money management? PreCash and the other companies creating these debit cards must have a great business model because it seems that so many celebrities can’t resist the lure of endorsing these less-than-esteemed products. The Kardashian Kard was shut down in November amidst a slew of negative press surrounding the fees.

Maybe Joyner is getting a nice financial cut for his partnership but unfortunately, he’s already compromised his brand with this deal because as it stands today, no one associated with a pre-paid card cannot be deemed as truly committed to African-American prosperity.

We’ll see how this foray from Joyner works out but in the meantime, shouldn’t we think that these Black leaders maybe find a way to endorse banking. Bad credit history doesn’t keep you from obtaining an account.

By Brittany Hutson

This week, the Kardashian sisters, Kim, Khloe, and Kourtney, became the latest celebs attempting to pry into your wallet with the launch of the Kardashian Prepaid Debit MasterCard. This must be the season for branded prepaid cards; last month, Mack Maine, president of Lil Wayne’s super group Young Money, revealed that the group would release a prepaid card though the exact date is unknown at this time.

Celebrity prepaid cards/credit cards are nothing new. We all know of Russell Simmons’ infamous RushCard and in 2004, Usher launched a prepaid MasterCard that is now defunct. What’s particularly scary about the Kardashian card is that it is being marketed to impressionable teenagers as young as 13 to teach them how to better manage their money, said spokeswoman Eve Sarkisyan. Parents are also lured in by marketing attempts which explain how they will be able to monitor their teens’ spending habits by cellphone.

The marketing and advertisement may sound and look pretty, but the fact is that the Kardashian sisters should in no way be considered role models for smart spending and money management. Who would want to take lessons on personal finance from Khloe, who owes $18,490.74 in back taxes TMZ reported in August, or Kim, who proudly boasts that she has a spent $2,500 on a pair of lace-and-python Christian Louboutin booties and dropped $30,000 for a crocodile-skin purse from the French boutique Hermes in Paris? This is the same woman who admitted on her show that she was battling a shopping addiction.

It’s doubtful that today’s teenagers, who are so engulfed with the lifestyles of the rich and famous, would be sporting a Kardashian card saying, “Kim is teaching me how to manage my money.” They will certainly flash it around to their friends and take it to the mall to swipe, swipe and swipe some more so they can “keep up” with their beloved “role model.”

Prepaid cards have appeal because there are no overdraft fees or interest, and can be used so long as there is an adequate amount of money deposited onto the card. But it’s still geared towards people who have low or no credit, and the underbanked—meaning they have a checking or savings account but rely on alternative financial services such as check-cashing places and payday loans. According to the FDIC, an estimated 31.6 percent of Blacks are underbanked.

But essentially, the real root of evil associated with prepaid cards is the fees that come with them. Just like how the RushCard has come under scrutiny for its accompanying fees that in the long run keeps people in debt, the Kardashian card is no different. It will cost $59.95 to purchase the card with the inclusion of 6 months of monthly fees, or you can purchase the card for $99.95 with the inclusion of 12 months of monthly fees. After the initial purchase period, the monthly fee is $7.95. Among the fee-based services, there is a $1.50 ATM withdrawal fee and a $2.00 fee for bill pay per item.

It’s clear the Kardashian sisters have no intentions to impart on their fans responsible financial management. During their launch party on Tuesday for the card, Kim tweeted, “Thx 4 coming out 2 support our Kardashian MasterKard! Let’s go shopping!”

For what? A $30,000 purse? Sure Kim.