Most prepaid cards have a ton of fees that can really add up, thus making them pretty unfriendly to consumers. Is the Bluebird from American Express and Walmart any different? The answer may surprise you…
Anyone who is a regular reader of my blog will know that I have always taken a rather dim view of prepaid debit cards. That’s because virtually all of them feel like a scam given their punitive fee structures and limitations. Over the past several years, I think there are only a few that have ever received a favorable review from me (American Express’ prepaid card being one of them).
So how does the new Walmart BlueBird measure up? Is it the same thing? No. BlueBird is a debit card-based checking account alternative. It’s a wonderful concept and product but unfortunately Bluebird (nor any prepaid debit card) can’t help you build a credit history.
Going back to the review of the Amex BlueBird, there are some drawbacks, but the benefits far outweigh the costs if you’re in the market for a prepaid debit card.
Competitive fee structure – I created this chart to show you a quick side-by-side comparison. This chart doesn’t include every fee below for every card (some of these charge for replacement cards and others things). However, the fees below are the most common ones I think you would encounter during a given month…
Free cash reloads – As you see, there are two major differences between AmEx’s Bluebird debit account alternative (brought to you by AmEx and Walmart) and AmEx’s own prepaid card (brought to you from AmEx directly). The biggest differences are the number of free ATM uses – and probably more noticeable – the cost for loading cash onto the card.
As I mentioned in my review of the AmEx Prepaid, its only Achilles heel is that cash reloads cost up to $4.95 (because you have to buy a MoneyPak to then load onto your account). That problem is solved with the Bluebird, since it gives free cash reloads at Walmart stores. If you’ve ever had a prepaid card you will know this is a huge benefit. Unless you have direct deposit set up with your employer, loading money onto a prepaid card every month can get expensive in a hurry. You might think Walmart is being altruistic by not charging a fee, but there’s a method to the Arkansas-based juggernaut’s madness. They know if they can get you to come back in to their store on a regular basis you will buy more of their stuff. There’s a reason they are the world’s largest retailer.
Better Benefits – On all American Express cards – yes even their prepaid debit cards – you get Purchase Protection and Roadside Assistance (note: they only arrange roadside service, they don’t pay for it). If you’re not familiar with the Purchase Protection perk, it covers eligible items against theft and some types of accidental damages for 90 days from date of purchase. Terms and restrictions apply.
Walmart logo is not prominently featured – Not to diss Walmart, but having the Walmart logo splashed across the front of your debit card (like the Walmart MoneyCard does) isn’t exactly the classiest thing, or at least that’s a common complaint I’ve heard from people. If that bothers you, then the Bluebird is a nice alternative since it doesn’t have their logo on the card’s front. Keep in mind though, that could change in the future.
Transferring to other cards – Here’s a cool feature… you can transfer money from one Bluebird account to another free or charge. They allow this for up to $2,500 per month. This is a great option for those sending money to a friend, ex-spouse or family member who might live in another state or country. In fact, cross-border remittances are one of the biggest uses of prepaid cards for those who don’t have a traditional bank account or those who simply don’t trust banks. It eliminates the need for buying and sending a money order or wiring funds through Western Union each month, both of which can get expensive. With a prepaid card you can send the money to their prepaid card by just going online and completing the transaction without any fees involved.
Can create sub-accounts – Similar to adding authorized users on a credit card, with Bluebird you can add sub-accounts and give them specific spending limits.
Direct deposit required for free ATM use – Without it, be ready to fork over $2.00 each time you visit a MoneyPass ATM (and even more for out-of-network ATMs).
To avoid the $2 fee you will need to setup direct deposit. But if doing that is an option for you, then suddenly the other AmEx Prepaid becomes equally attractive since it offers free reloads thru direct deposit (meaning you could circumvent its nasty $4.95 expense for cash reloads).
FDIC insurance – Funds on a temporary Bluebird card are not FDIC insured. However, funds on your permanent card are, up to $250,000, with this caveat: Your Bluebird funds will take approximately one business day for them to be deposited into the FDIC-insured deposit accounts where they will be held. During this brief transfer period, they will not have FDIC protection.
This cannot help you build credit – In my opinion the #1 biggest reason you should avoid prepaid cards and debit account alternatives, because they do absolutely nothing to build your credit score. In fact, they don’t even show up on your credit report at all. That said, cards like Bluebird can be a great portable checking account and are ideal for those under 18 to learn to use plastic responsibly. Plus, they can be a good way to limit your spending since you can’t spend more than is loaded to the card.
But, you have to ask yourself this question… do you really want to be in the prepaid crowd your whole life? Or would you rather work your way up to bigger and better things and swim in the adult pool? If the latter, I would recommend going with a secured credit card instead. Here are the benefits they offer:
- You can get one even with bad credit – A secured card is backed by your security deposit. For that reason, you can get one even if you have terrible credit.
- It shows on your report like a regular credit card – Most secured cards will show up on your report the exact same way a regular unsecured card would.
- Use it to build credit – With responsible use, it can help you build credit. This of course will help you with future goals like buying a car or getting a mortgage some day.
To learn more about secured cards, go to this section I wrote about them.
When it comes to the fee structures, it’s hard to complain about the Bluebird card. This is by far the best debit account alternative in terms of overall fees (or lack thereof) and if you do frequent cash reloads. The only big drawback about it, in my opinion at least, is that you have to remember the Bluebird cannot help you build or improve your credit score. For that reason, I suggest you consider getting a good credit card, as well.
Written or last updated August 1, 2014