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The AmEx Prepaid Debit Card’s Dirty Little Secret

by on June 20, 2011

Update October 2013: The Amex Prepaid is no longer being offered. In its place is the lower-fee, actually-pretty-decent American Express Serve. Check out our review of the Amex Serve here.

We wrote last week about American Express’ new prepaid debit card, which is being billed as a low-fee, easy-to-understand alternative to the cluttered (and frankly shady) prepaid debit market. We agreed, to an extent: most prepaid cards charge for everything under the sun, including withdrawals, purchases, and balance inquiries. We even compared it favorably to some checking accounts. But then we found a dealbreaker in the terms.

Outside of ATM fees, the American Express card has only one fee to worry about, and that fee renders the card essentially irrelevant: the cost of reloading with cash. If you want to reload through an AmEx credit card or through a checking account, there’s no charge. Otherwise, though, you need to buy a MoneyPak from Green Dot, which costs $4.95.

This little caveat is what kills the AmEx prepaid debit card, since no one with an AmEx credit card or a checking account has any use for a prepaid debit card.

The card for the unbanked requires a checking account

The primary reason to get a prepaid debit card is to avoid having a checking account to begin with, whether because you can’t make the minimum balance requirements to avoid paying fees, or because you simply don’t want to keep your cash with a bank. In fact, prepaid debit is marketed as a “safe” alternative to credit and cash; there’s no possibility of overdrawing or going into debt, and it’s less cumbersome than bills and coins. But if you need a checking account to reload your prepaid card, then you already have a debit card that isn’t charging you to reload it.

This reveals the biggest hole in AmEx’s prepaid strategy – their cards don’t have access to direct deposit. Most prepaid debit cards allow you to get your paychecks deposited onto the cards at no charge. By using direct deposit, you can avoid having to pay any reloading fees, and you can avoid having to pay more fees to get cash from shady check-cashing locations. But American Express doesn’t offer this crucial feature yet.

If the AmEx card is supposed to be a “fee-free” alternative for the unbanked, it falls short of its goal. Anyone with a bank credit card or checking account – who can reload the AmEx prepaid for free – has no need for a prepaid card. And anyone who doesn’t will have to pay Green Dot $4.95 every time they reload the card. If you get paid bi-monthly, that’s $9.90 each month out of pocket already.

First among prepaids no more

Unfortunately, we’ll have to revise our estimation of the AmEx prepaid debit cards. A customer service rep told us that AmEx is working on setting up a direct deposit system, which would allow users to reload for free, but for the moment, the only way to avoid opening a checking account is to pay Green Dot $4.95 per reload.

Here’s a hypothetical breakdown of the cost of the AmEx prepaid card, the Capital One Prepaid MasterCard, the popular Walmart MoneyCard, and the RushCard, which is currently under investigation by Florida’s attorney general. We assume that the user withdraws money from an ATM twice a month; loads the card with $200 twice a month via direct deposit, for a total of $400; and avoids all other fees.

Card Name ATM Fees (2x) Reloading Fees (2x) Monthly Fees Cost per Month
AmEx Prepaid $2 $9.90 $0 $11.90
PinkDiamond RushCard $0 $0 $9.95 $9.95
CapOne MasterCard $1.95 $0 $4.95* $8.85
Walmart MoneyCard $4 $0 $3 $7

*There is $4.95 monthly fee incurred for loading less than $500 a month.

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  • smelly_cat

    My initial attractions to this card were the amex benefits in a pre-paid card and the pre-qualification of an amex charge card after consistent use. I deposited funds every paycheck to the card. 4/24 my account balance was depleted to zero at a Target 700 miles away. I called Amex support and reported the fraudulent transaction. I spoke to several reps, none in which were American working at American Express and was told I needed to submit a dispute form and the “investigation” could take up to 8 weeks. The dispute form turned out to be an unprofessional, sophomoric word document. I was able to call Target and have them confirm the transaction, the time and what was purchased in less than seven minutes. I don’t understand why it would take Amex so long to find the same information. Either Amex is using a third party to administer the prepaid program or Amex has absolutely the worst fraud protection of any credit card company. Either way, Amex does not really give a damn about it’s prepaid card holders. The reps didn’t even offer to cancel the fraud card and send a new one. I had to ask for it.

    Highly disgusted.

  • Frank Corrigan

    what a nightmare with American Express. I agree when you try and contact Customer Service you get obviously outsourced workers which makes communication difficult at best. I had a problem with the website when I tried to reload funds from my checking account. I got an error message saying it didn’t go through. I tried a few more times before calling the phone number. Unfortunately the next day I learned that all the transactions had in fact gone through. When I contacted AMEX they told me I had to deal with my bank to get my money back. Not a problem, (Thanks Chase) however AMEX then cancelled my card without bothering to inform me. So when I received my funds back in my checking account I tried to reload again the amount I originally wanted to load. When I went to confirm that transaction had gone through I finally learned my card showed Suspended. Do you think American Express would unsuspend my card or even try to send my money back to me……..no you have to contact your own bank again. Thanks for nuthin AMEX.

  • John

    Dude the person that wrote this review is a straight hater of American Express, and probably works for the other rip-off prepaid card companies. Hands down American Express prepaid card is the Best pre-paid card available, and i can only see it getting better in the future. What the person complains about in this article, is ridiculous and stupid. I have a checking account and my bank charges me $1.00 everytime I use the card at a POS. When i have to insert my pin, my bank charges me $2.00, and if i decide to purchase an item online from another country, my bank will charge me a whopping 3.9% foreign transaction fee. For me i purchase alot of goods from other countries, and have been getting hit with these foreign transaction fees from my bank. American Express prepaid charges NO Foreign Transaction fees whatsoever. Pretty much everything is free with the American Express prepaid card. Do note it is the vendor that American Express makes money off of with the Prepaid Card, and not the Cardholder. And that’s a beautiful thing, given i am on a budget and looking to save a few bucks. So bypass the crap that is written in this article, and go cop yourself a American Express prepaid Card. for it’s the Best.

  • John

    Lastly, here’s somewhat of a rundown of the Superiorness of obtaining and using a Prepaid American Express Card.

    The American Express Prepaid Card has no recurring fees. Unlike many other prepaid cards, you keep more of your money in your wallet—where it belongs.

    NO ANNUAL FEES, NO MONTHLY FEES, NO CUSTOMER SERVICE FEES, NO CREDIT CHECKS OR OVERDRAFT FEES, NO TRANSACTION FEES, NO FOREIGN TRANSACTION FEES, ONE AMERICAN EXPRESS FEE-FREE ATM WITHDRAWAL PER MONTH
    Thereafter, American Express will charge $2.00 per ATM withdrawal, which is assessed against the Card balance. Please note: ATM owners/operators may charge their own fees for ATM transactions and balance inquiries.

    • http://www.nerdwallet.com/ NerdWallet

      Hi John,

      You can find our updated review here that incorporates some of the better terms: http://www.nerdwallet.com/blog/2012/american-express-prepaid-direct-deposit/. We do not receive commissions on prepaid debit cards.

      Thanks for reading,
      Anisha

      • John

        Yes, Anisha, but you are focusing on the onsensical deficiencies that such deficiencies are 100% worser with other cards, and you appear to be not wanting to focus on the outstanding overwhelming positiveness of the Amex prepaid card. And the part you talk about in your article about the $4.95 to load the card, is a normal fee that mainly every prepaid card charges to reload. To me the reloading issue you brought up is a dead issue. And you know it’s a dead issue. And if that is an issue, one can always open up a checking account and shoot the money from the checking account to the amex card for free, so then now no 4.95 charge, or put a nice amount of cash on the prepaid card to avoid subsequent reloads. And I’d rather use the amex card than my banks checking debit card for my bank Wells Fargo charges fees for everything under the sun, Unlike Amex that charges NO TRANSACTION FEES, NO FOREIGN TRANSACTION FEES, NO MONTHLY FEES, NO ANNUAL FEES, NO CUSTOMER SERVICE FEES, Allows ONE AMERICAN EXPRESS FEE-FREE ATM WITHDRAWAL PER MONTH
        Thereafter, American Express will charge $2.00 per ATM withdrawal, which is assessed against the Card balance. Listen, I’ve tried everyone of these prepaid cards, and they all rob you with fees to no end. That’s the bottom line… The American Express Prepaid card does not rob the cardholder, they sock it to the card accepting vendors. They are the ones that pay, not the cardholder. And the Amex prepaid card fee schedule reflects that, for Amex pretty much doesn’t basically charge the cardholder for anything. And any company that supports me keeping more money in my pocket , i gotta like’em. So in closing the issues you bring up about the Amex prepaid Card, do not hold water and are mainly frivolous nonsensical issues. And the funny thing again , is that you know this, I still say that you may be somehow affiliated with one of these other prepaid card companies, and afraid that the American Express prepaid , is going to put you’s guys out of business since the American Express prepaid card is such a sweet deal for the cardholder, and is something that the other wanna be prepaid card companies don’t want to deal with for they are money hungry and greedy. Now in closing Anisha, You know that the American Express prepaid card is the best, however you may be happy with paying tons of Transactions Fees, e.g., paying a $1.00 – $2.00 everytime you use a card, or get hit with a 3.9% foreign transaction fee which is what my personal bank Wells fargo charges me. Amex does not charge any of those dasterdly fees…. So Hat’s off to American Express, keep up the good work guys.

    • Gene Boion

      Gene Boion • a few seconds ago

      I am posting it on my business website along with audio tape recording in conversation with Serve Clerk . Serve (American express) pre paid cards can not be used. It doesn’t have 4 digit security code the cleak can tell you your balance and that’s about it. The cards are fraudulent by nature collect them as much as you can and bring to circuit court. Criminal charges have to be brought against Serve for theft by deception

  • jpostman314

    Lets point out that you can load from a savings account for free and they DO offer direct deposit for free as well. I use both of these features weekly, by far the best prepaid debit card out there.

    • Brian Walker

      Do you find yourself getting your direct deposit early? I have the Rush card and I get mine the Wed before payday

  • Vanessa A. Frazier

    Can this card be used for car rentals.

  • http://www.wistex.com/ WisTex

    American Express Serve offers direct deposit. They even have a promotion going on right now offering to pay you $50 to start using it.

  • WARREN G

    CARD CAN BE USED AND HAS BEEN USED BY ME FOR CAR RENTALS. I HAVE HAD MY SALARY DEPOSITED VIA DIRECT DEPOSIT AND I HAVE NEVER PAID $11.00 A MONTH EVER. BEST CARD AS FAR AS I AM CONCERNED

  • Gene Boion

    I am posting it on my business website along with audio tape recording in conversation with Serve Clerk . Serve (American express) pre paid cards can not be used. It doesn’t have 4 digit security code the cleak can tell you your balance and that’s about it. The cards are fraudulent by nature collect them as much as you can and bring to circuit court. Criminal charges have to be brought against Serve for theft by deception