American Express launching credit-building prepaid debit card

American Express

American Express has unveiled a prepaid debit card that helps users qualify for an American Express credit card. Photo Credit: Images_of_Money/Flickr.com/CC-BY

Suze Orman, financial guru to Oprah Winfrey, announced she would find a way to help people build credit with her prepaid debit card. American Express, however, appears to have beaten her to the punch.

Credit on debit

A chief criticism, according to Time magazine, of prepaid debit cards is that they don’t help people build a credit rating like credit cards do, which doesn’t help the unbanked build credit history. Granted, that’s kind of like saying that a Kia is not the best car to drive because it isn’t an airplane. The same also holds true for regular debit cards; the card is tied to a checking account rather than a line of credit.

Suze Orman, celebrity personal finance guru has launched her own prepaid debit card. When she announced the card, which is called The Approved MasterCard, she also said that she was working on a program through credit reporting bureau TransUnion to allow card users to build credit using it. The card does, according to MSNBC, have a benefit of credit monitoring services through TransUnion, but no impact on the user’s credit report.

However, a prepaid card by American Express does.

Make Your Move program

The new program, according to the BusinessInsider, is called Make Your Move and doesn’t bolster a user’s credit rating, per se, but rather functions as a trial period of sorts. If users meet certain criteria, they may be selected by American Express after a six-month period to be eligible to sign up for an American Express card.

[Payday loans don’t hurt your credit]

The program is weighted toward frequent users. According to Time, it is encouraged that users load the card frequently with funds and spend regularly using it, like with a normal debit card. Users can deposit up to $5,000 per month via direct deposit and withdraw up to $400 per day from an ATM, up from the previous limit of $200 per week.

Booming business

Prepaid debit cards, according to Daily Finance, were already a $48 billion industry as of 2009, increasing in volume to $65 billion by the end of 2010. American Express was the last of the four major card issuers, besides Discover, Visa and MasterCard, to offer a prepaid debit card, launching its first in 2011.

American Express is also launching a prepaid card at participating Walmart stores, according to the Wall Street Journal, under the brand name “Bluebird.” It isn’t known if those cards will be eligible for the “Make Your Move” program.

Sources

Time

MSNBC

BusinessInsider

Daily Finance: http://www.dailyfinance.com/2012/03/22/life-in-plastic-its-fantastic/

Wall Street Journal: http://blogs.wsj.com/deals/2012/03/05/american-express-testing-out-prepaid-card-at-wal-mart/

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