Chase Debuts Low-Cost Prepaid Card

The Record ( — Tuesday, July 10, 2012

The Record

Prepaid money cards, which are growing in importance as a cash and checking account alternative, are notoriously fee-laden. But that may be changing.

J.P. Morgan Chase & Co. announced Tuesday the national debut of Chase Liquid, a low-cost prepaid card, following PNC Bank, Regions Bank and Wells Fargo into competition for lower-income customers with Walmart, Green Dot Corp., and others.

"Consumers are looking for an affordable and predictable way to manage their money," Ryan McInerney, CEO of Consumer Banking at Chase, said in a statement. "Chase Liquid is a low-cost alternative to traditional checking accounts, and its convenience and pricing transparency sets a new standard for prepaid products."

About 13 percent of U.S. adults had prepaid cards in 2011 compared with 11 percent in 2010, according to a study by Pleasanton, California-based Javelin Strategy & Research, a market-research firm.

The cards, which can be used just like debit cards, are attractive to the so-called unbanked who may be paying high fees to cash checks and to buy money orders, and who may be looking for an easy way to make online purchases. They also are used by those who are no longer able to open a checking account because they have a history of overdrafts or bounced checks. Prepaid cards are also popular with parents who have children in college.

In addition to monthly maintenance fees, financial firms can benefit from the opportunity to invest the deposits while collecting swipe fees from merchants when the cards are used to make purchases. They can also easily market other products, such as payday loans, to prepaid card holders.

The Consumer Financial Protection Bureau announced in May it was investigating the mostly unregulated industry, and is taking public comments through July 22.

Many of the cards impose an array of ala carte fees that may include charges for card activation, ATM withdrawals, bill payments, inactivity, customer service calls and balance inquiries.

A March study by Consumer Reports found that accumulated monthly fees ranged from $8.64 to $29.35 in typical scenarios with some of the most popular prepaid cards, which include the Walmart MoneyCard, RushCard and AccountNow.

The only fee for users of the Chase card, available at 5,500 branches nationwide including 226 in New Jersey, is a $4.95 monthly maintenance charge, less than half of the $12 fee that Chase charges small account holders for basic checking.

Customers can get a card with a deposit as small a $25 and reload it at Chase branches or deposit-enabled ATMs for free. ATM withdrawals within the bank's network of 17,500 are also free of charge.

Greg McBride, senior financial analyst with, said Chase's card is "a very transparent offering and it's just one monthly fee distinguishes itself from many of the prepaid card offerings. This is the direction that prepaid card are going with banks increasingly getting into the market," he said.

The American Bankers Association said the number of banks participating nationwide in its community bank prepaid card program offered through a third party servicer has more than doubled in the past year to 62, although so far no New Jersey-based banks are taking part. The banks can set their own fees and share in swipe fee revenue.

Chase's decision to use a single page fee disclosure form for its prepaid card is "a step in the right direction" for the industry, said Alex Matjanec, co-founder of

Phyllis Salowe-Kaye, executive director of consumer watchdog New Jersey Citizen Action, agreed.

Chase "should be commended," she said. "If it's a way for people to establish a banking relationship, it's a good thing." she said.

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