[Editor’s Note: In March 2013, after we published this article, American Express struck a deal with Wells Fargo allowing FDIC "pass-through" insurance to cover Bluebird prepaid cards. Customer funds are now protected up to $250,000.]
Here's something else that's got the potential to undermine our financial future…
It's about those prepaid cards, and the games that are being played with them that you may not know about.
Prepaid cards have lots of benefits, especially for the "unbanked."
These are the people who more or less may live paycheck to paycheck, or don't have jobs but need a "card" because both credit and debit cards are how we pay for most things these days.
A lot of people are rebelling, and rightfully so, against the higher and higher fees that banks are charging on checking accounts (and for all their other "services") and are turning to prepaid cards as an alternative means of paying for goods and services.
It is a bank.
That's because back on November 10, 2008, at the height of the credit crisis, American Express had to become a bank (actually a bank holding company) so it could take money from the Federal Reserve to stay alive.
You forgot that, didn't you?
And Wal-Mart, well, they have been trying to become a bank in several end-around ways.
Now, they've come together. The "bank" status of American Express and its 100-year history of issuing Travelers Checks (the first prepaid cards, really) and the marketing power and reach of Wal-Mart, into the pockets of the less than wealthy and notably underbanked, has yielded a Bluebird capable of flying in the face of safe banking.
There are lots of problems with the prepaid card game. My biggest problem is that there are plenty of fees attached to these types of cards. They're NOT free. A lot of the time folks aren't even aware of the fees they're paying.
They just know that bank fees are higher, or at least they think they are higher, which most of the time, they are.
What You Need to Know About Bluebird
Then along comes Bluebird with its no-fee prepaid cards. Sounds good, right? It is for now.
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.