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Amex Bluebird Offers Check Writing, FDIC Insurance

March 26, 2013
Credit Cards, Promos
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The Bluebird just got better: American Express and Walmart just announced a series of changes to make the prepaid card more versatile, safer and more checking-account-like.

Update May 29th, 2013: The Bluebird just announced that it will cut down the monthly maximum for checking or savings account loads from $10,000 to $2,000. For those of us who use the Bluebird in only limited circumstances, like making a rent deposit with a pre-approved check or taking advantage of its no foreign transaction fees for international travel, this is mildly annoying. We tend to like the Bluebird for large, infrequent purchases like those described above, and this means you’ll have to write yourself a check from your deposit account to add more than $2k a month.

The Bluebird’s new features include:

  • Accounts are now FDIC-insured, removing one of the biggest Bluebird drawbacks
    • As a result, you can now deposit government benefits (such as Social Security, military and tax refund payments)
  • Annual card load limit raised to $100,000
  • You can now write pre-authorized checks against Bluebird funds
    • All Bluebird cardholders can get one free checkbook until August; after that, a checkbook is free for direct deposit cardholders and $26 for non-direct deposit cardholders.

What does this mean for consumers? It means that the Bluebird might just be the future of banking.

“No overdraft” checks

A key component of the Bluebird’s new features is writing checks against the balance on the card. This normally flies in the face of prepaid cards’ no-overdraft policy: Depending on when the recipient cashes the check, you may end up overdrawing your account.

The Bluebird card’s method is different, though. You get a unique authorization code online or on the Bluebird mobile app, and the funds are immediately deducted from your account. You then write the code on your check, hand it over to the payee, and go on your merry way knowing that you have the funds to cover the check. It increases flexibility while still protecting you from overdraft fees.

It’s everything you liked about checking

For a very specific user, the Bluebird can be just as good as a checking account – or better, if they have a tendency to overdraw. You can add cash for free at Walmart – a feature you’ll find on very few prepaid cards – and you can avoid ATM surcharges at MoneyPass’ 20k+ ATMs. (There’s a $2 ATM withdrawal fee, waived if you use direct deposit). If you insist on prepaid, and use direct deposit, you can basically use the card fee-free. If you don’t use direct deposit, depending on your ATM habits, you might be better off with a card that has a low monthly fee and no cash load or ATM fees.

The Bluebird fulfills the needs of serial overdrafters, who eschew checking accounts because they tend to incur insufficient funds fees. Now, such a person can write checks, deposit cash, send mobile payments and have FDIC insurance without paying through the nose for the privilege. Banks used to get a substantial portion of their checking revenue from overdraft fees; the Bluebird challenges both that model and the bleed-’em-dry model of traditional prepaid debit cards.

The downsides of the Bluebird

The Bluebird is not, however, the second coming. Main reason: the name – American Express isn’t as widely accepted as Visa or MasterCard. Also, you can’t get cash back at your grocery store, so there’s no way to get cash fee-free if you don’t use direct deposit. But aside from that, it’s an excellent supplement to other financial products.

Why I have an Amex Bluebird

NerdWallet has reserved some of its harshest words for prepaid debit cards – $1 per transaction? $10 just to purchase the card? No, thank you. But with these new offers that have all the capabilities of a modern major checking account, certain prepaid cards do deserve consideration among the banked and unbanked alike. Here’s why I carry a Bluebird in my wallet:

  • Mobile check deposit. My credit union – bless its not-for-profit heart – doesn’t offer mobile check deposit, and the Bluebird app is a convenient way to deal with checks.
  • No foreign transaction fee. My credit card – the Chase Freedom – carries a foreign transaction fee, so I used my Bluebird card in Canada to avoid getting charged 3% of every single dollar I spent across the border. Debit cards with no foreign transaction fee are fairly hard to come by, so the Bluebird is a good alternative if you’re traveling to an Amex-friendly country.
  • Buying off of Craigslist. I’m particularly excited about the pre-authorized check feature, because it makes large transactions on Craigslist and similar sites all that much easier. A payee can call American Express to verify that a check is pre-authorized and will clear, so instead of paying $5,000 in a stack of twenties, you can just hand over a check.

The new features of the Bluebird make it all the more attractive, not just for the unbanked, but for those who have credit or debit cards and just want a little extra.