By: Martha C. White
March 23, 2012
AmEx gives prepaid card users a chance to 'graduate' to a regular charge card
Prepaid debit cards catch a lot of flak for being loaded with fees, but that's not even our biggest beef with them: When people use prepaid debit in lieu of credit cards, they're not building a credit history, which strands them on the fringes of the financial mainstream. When Suze Orman came out with her prepaid debit card, she said she would work with credit bureau TransUnion to try and figure out a way to incorporate prepaid card use into a conventional credit file. Now, it seems like American Express has beaten her to the punch with a program called "Make Your Move."
"This program is intended to help consumers with thin or no credit files. All they need to do is load and use their American Express prepaid card regularly," spokeswoman Vanessa McCutchen says via email. AmEx doesn't report how people use their prepaid cards to any credit bureau, but they keep tabs on it internally. Customers it deems credit worthy may, after a minimum of six months using the prepaid card, be invited to apply for a conventional American Express charge card.
Financial website MainStreet.com cited an AmEx executive as saying that the interest rates offered to prepaid customers who upgraded to a charge card would be comparable with those offered on existing products.
McCutchen says AmEx doesn't have a specific set of criteria prepaid customers must meet in order to be eligible, and it suggests "using the prepaid card for everyday spending and actively and consistently loading the card." The company's website also suggests that people reload the card when the balance is "low," although it doesn't specify a dollar amount.
When it was initially rolled out, the prepaid card had a maximum balance of $2,500, which has been increased. Now the card will accept loads of up to $5,000 a month via direct deposit. AmEx also bumped up the amount of cash a user can withdraw from an ATM from $200 a week to $400 a day.
Make no mistake, prepaid debit still has a lot of flaws: The products are under-regulated, according to consumer advocates, and even the "better" offerings burden users with fees. But this is pretty significant in that it's the first time a major card issuer has offered a prepaid debit tool that gives users an on-ramp to help build their credit -- which means they won't be stuck being prepaid users forever.