Although they don’t improve your credit, prepaid cards do have some perks. You don’t have to have good credit or a bank account to get one. The amount loaded on the card gives you strict spending ceiling. And you still get to make purchases online and avoid carrying around cash.
The biggest drawback? All prepaid cards charge fees. In fact, some are absolutely riddled with them: There’s often a fee for getting the card, another for making a call to customer service and more for adding money. However, if you’re going to go the prepaid route, the American Express Serve card is a good low-cost option that can be virtually free if you play your cards right.
Serve is offered by American Express, a CreditCardForum advertising partner. Here’s what you need to know about it:
It has low fees compared to the rest of the industry
Like all prepaid cards, the American Express Serve has fees. But at least it keeps the nickel-and-diming to a minimum.
The chart below shows a run-down of the common fees reloadable prepaid cards charge – and where the Serve falls compared with other cards in the space:
|AmEx Serve fees|
|AmEx Serve||Other prepaid cards in the industry|
|Card purchase fee||Free online; $2.95 in stores||$0 to $9.95|
|Monthly maintenance fee||$1 (see exceptions below)||$4 to $9.95|
|Fee to add money||$0 (third-party fees apply if using MoneyPak or similar)||$0 to $2.50 (not counting third-party fees)|
|Customer service fee||$0||$0 to $2 per call|
|U.S. ATM withdrawal fee||$2.50 ($0 at MoneyPass ATMs)||$1.95 to $2.50 (usually free within card's own ATM network)|
|Foreign transaction fees||2.7%||2% to 3.5%|
As you can see, this card leads the pack when it comes to keeping certain fees low – and, at worst, it falls in the middle.
Pay particular attention to the monthly fee. At $1, it’s already low, but you can eliminate it entirely by doing one of the following in a given month:
- Receiving a direct deposit on the card.
- Adding $500 or more to your account.
- Adding your card to your Isis Mobile Wallet
Those hurdles are pretty low, and, even if they aren’t convenient for you every month, you’ll pay $1, worst-case scenario. Also, keep in mind that there are no monthly fees in N.Y., Vt. and Texas.
In addition to the monthly fee, another fee you can expect to pay on a regular basis is an ATM withdrawal fee. If you’re not near a MoneyPass ATM (there are 24,000 of them nationwide), you’ll be paying $2 per withdrawal, plus any fees charged by the bank that owns the ATM.
You might ask how AmEx is making any money off this card if the fees are so low. Each time you swipe, the merchant gets charged a processing fee. So, if this becomes your card of choice, AmEx will make money off of you (well, your purchases, anyway), even if you’re not paying much in fees.
Reloading the card is easy, but can get expensive if you’re not careful
Some prepaid cards will let you get direct deposits onto the card for free and then gouge you if you want to reload from a bank account, debit card or credit card. Others won’t let you load from a debit or credit card, period.
The Serve card offers a number of cost-free loading options, however. You can top off your card free with cash at participating 7-ELEVEN and CVS locations, with direct deposit, by depositing checks through the Serve mobile app, by drafting funds from your checking or savings account, or by transferring money with a debit or credit card.
The only time you’ll pay to load the Serve card is if you choose to purchase a MoneyPak or Vanilla Reload — and that’s where things can get expensive. If you reload $100 via a $4.95 MoneyPak, you’re spending 5 percent of your own money for the privilege of … spending your own money. It’s easy to criticize people who get trapped in that cycle, but remember: A lot of people are drawn to prepaid cards because they don’t have bank accounts. MoneyPaks and Vanilla Reloads (available at a ton of discount chain stores) would be the most convenient way to get money on your card if you don’t have a bank.
It has protections and money-management tools
One of the biggest advantages of credit cards is that they come with all kinds of extra protections, from purchase protection to travel insurance coverage. While the Serve card can’t compete with the most perk-laden rewards credit cards, it does kick in some extras, including:
Purchase protection: If you buy something with the card, and it gets lost or stolen within 90 days, American Express will reimburse you, up to $1,000 per occurrence. It’s a common benefit on credit cards – but extremely rare among prepaid cards.
Protection for the money you load: If the money you put on the card is gone as soon as a thief steals it or if the bank holding it fails, you might as well just carry cash, right? Luckily, you can consider the money you load onto your Serve card safer than bills in your wallet.
These days, FDIC protection for the funds you load onto prepaid cards is par for the course with reputable financial institutions. With the Serve card, things are a little different because American Express is not a bank, so any funds placed with it are not FDIC insured. AmEx gets around that by placing your funds into custodial accounts at FDIC-insured banks, according to the card’s website. There is some fine print to be aware of, however: It takes AmEx about a day to put your funds into such an account, and during this limbo period, they’re not FDIC insured. Still, you can consider your money pretty safe unless AmEx happens to go insolvent the very day your funds are in limbo.
But what happens if you lose your Serve card or it gets stolen? The card advertises its fraud protection – if a thief uses your card you simply get refunded after you call American Express to report the unauthorized purchases. Be careful, though —That protection is available only to those who have registered for a Serve account with American Express. If you’ve just purchased a temporary card at a retail location, loaded it up with some cash and haven’t yet signed up for a Serve account (and a card with your name on it), you won’t be refunded for any fraudulent transactions that happened before you called customer service, so it’s just like losing cash in that type of scenario. In fact, it’s in the fine print:
Money-management tools: This is another common perk among prepaid cards. Most of them have ways to track your spending and set limits. The Serve card uses a program called “Reserve.” Essentially, you have the ability to move funds from your available balance to a special Reserve account that acts as a savings account for big purchases. That way, the funds stay out of the way – you can’t spend them unless you transfer them back to your regular Serve account.
Money-sharing tools: You can send money to anyone with a Serve account via your desktop or via the mobile app.
Roadside assistance: This is another rare perk among prepaid cards, but it’s not as good as it sounds. You have the privilege of calling American Express’s roadside assistance hotline, and they’ll send you a tow truck or locksmith. But AmEx isn’t paying for it – you’re responsible for whatever the help costs.
Access to the Global Assist Hotline: This hotline will help you navigate any medical or legal emergencies you run into while you’re more than 100 miles from home. As with roadside assistance, you’ll have to pay for whatever help you need. But this perk can be helpful if you’re in another country, in big trouble and can’t speak the language.
The bottom line
While prepaid cards offer the convenience of plastic, they won’t help you improve your credit. If you’re seeking out prepaid cards because you’ve been rejected for credit (and want to build up your credit rating), check out the secured card offers here.
If, however, you want a re-loadable prepaid card for whatever reason, the American Express Serve is a good one. The fees are low compared to its competitors (as long as you rely on the free methods of reloading), and it has a generous suite of extras that are rare among prepaid cards.
Updated February 2016