Prepaid cards flood the market

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Walmart and American Express caused quite a stir with their new prepaid card, Bluebird, which they launched last month, pitching it as a bid to connect with small-account customers.

Consumers who lacked a conventional relationship with a mainstream bank appeared to be one likely market. The card was also aimed specifically at Walmart customers who may be less inclined to see value in their traditional bank. The hope was that the lack of account minimums or overdraft charges and the ability to use the card at ATMs and retail outlets would prove very attractive.

Do new-fangled prepaid cards represent a threat to banks and credit unions?

They certainly have the potential, which has many banks are jumping on the bandwagon. Almost 60 percent of banks now offer prepaid or reloadable debit cards, according to the American Banker. It will perhaps not be long before such cards become a standard offering, as many banks, especially smaller institutions, feel that the current regulatory environment favors these cards.

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