Once again, the credit card giant American Express has found a niche that sets itself apart from the competition. In response to the debit card swipe fee restrictions that are set to go into effect in July, American Express has introduced prepaid debit cards. Credit experts are not saying, and neither is American Express, whether this is a way for the giant to move slightly out of the credit card market, or if it is simply a strategic approach to cornering the debit card users that may stray from their banks, when banks start charging consumers more for banking products.
The AMEX Difference
Not only is AmEx offering a prepaid debit card option, but the credit card giant is also offering the new card with a variety of benefits that sets it apart from the crowd:
- Is not charging transaction fees for online purchases
- Does not charge a monthly maintenance fee
- Isn’t charging fees for balance inquiries
- Waives fees for activation and reloading the card from a bank account
- Doesn’t charge for replacing lost or stolen cards
While AmEx is a giant itself, the primary customers for the new prepaid debit card may well be some of the customers of the other major banks in the country. JPMorgan Chase & Co., Wells Fargo and even Bank of America customers are already seeing an increase in fees for certain items in checking and savings accounts, and Chase and Wells Fargo have already announced plans to cut back on rewards for their debit card programs.
Because the big banks are being forced to make changes to fee structures and reward programs to make up for the loss in revenue on debit card swipe fees, it could very well push loyal debit card users to jump ship to a lower cost alternative.
According to Dan Schulman, who is the group president for enterprise growth at AmEx, “More and more people will probably move toward prepaid cards as a substitute. Prepaid-card use expanded 35% percent last year with more than one billion transactions “and we think it will grow even more quickly as a result of the recent legislation.”
“The whole industry is looking at prepaid offerings as a way to generate growth,” said Brian Foran, an analyst with Nomura Securities International Inc. in an interview with Bloomberg.