American Express, mainly know as the credit card for the rich and famous, is now going after the prepaid credit card market. Why? Well, for a number of reasons: 1) The Durbin amendment cut the amount banks can charge merchants when their cards are swiped, but prepaid cards are exempt from this; 2) It’s a way to attract new customers 3) consumers are expected to load about $160 billion onto reloadable prepaid cards in 2014. Yes, reason number three is probably the main reason why American Express is getting into this market.
American Express Co. (AXP) , which primarily issues credit and charge cards to affluent customers, last year also began offering a low-cost prepaid card it is partly targeting to prospective customers who may not qualify for one of its traditional products. The lender is analyzing the usage patterns of its prepaid cardholders to determine if they might be a good fit for a charge card over time, executives have said. (MarketWatch)
It seems like another one of those questionable ways that credit card companies can make more money with hidden fees. For instance, with the prepaid credit card I believe you are charged to add cash to the card. However, it’s probably less than some of those other alternative credit cards.
In the end, yes, American Express has some fantastic commercials, like this old Wes Anderson ad, but they’re still a business trying to make money anyway they can.