On Tuesday, JP Morgan Chase announced that it would launch its own reloadable prepaid card this summer, called Chase Liquid. And, it doesn’t refer to the water under which your home now sits. The card costs $4.95 per month and will be available to any customer over age 18. Chase Liquid customers do not have to open an account at the bank, but must make an initial $25 deposit onto the card. “Chase Liquid is a low-cost alternative to traditional checking accounts,” said Ryan McInerney, CEO of consumer banking at Chase. By comparison a Chase Total Checking account costs $144 per year.
Chase is the latest entrant in a booming market for prepaids, a recent emergence resulting in the wake of of tighter regulations limiting banks’ abilities to charge higher fees in other areas. The prepaid market is not regulated in the same way. The cards are an increasingly attractive option for those turned off by higher bank fees or those unable to get traditional checking accounts.
Chase said earlier this year that customers who have less than $100,000 in deposits and investments were not helping the bank profit, and it has since made a push to focus on white-glove services for wealthy clients by expanding its Chase Private Client services.
But after Chase looked at the numbers, they couldn’t pass up this enormous pre-paid market. Last year, consumers loaded more than $57 billion onto reloadable cards, a big jump from $19.5 billion in 2008, according to estimates by the Mercator Advisory Group, a market research firm. The figure is estimated to be $160 billion by 2014.
So, for $5. a month, you too can let Chase loan your money to others while you aren’t using it and help them earn north of 10% on those funds. And they aren’t alone. Since November, Wells Fargo has charged $15 a month for some checking accounts unless customers have three accounts with the bank, maintain a minimum balance of $7,500 or have a Wells Fargo mortgage. Some Citibank customers are being charged $20 a month unless they keep $15,000 in their accounts, up from $6,000 before December. They’re also being dinged with a $2 fee for using non-Citi ATMs if their balance falls below the minimum.
Bank of America, even after a backlash last fall when it tried to impose a $5 monthly fee for debit card transactions, is testing a menu of checking accounts in Georgia, Massachusetts and Arizona with monthly fees of $6 to $25.
B of A said fees were triggered by a federal law championed by Sen. Dick Durbin, D-Ill., that went into effect Oct. 1. See? Not really their fault. It capped what banks charge stores for debit card transactions at 24 cents, down from an average of 44 cents. The law cut into quarterly revenue at Bank of America by $475 million, at JPMorgan Chase by $300 million and at Wells Fargo by $250 million.
Don’t get me wrong. I think the re-loadable debit card is a great new mechanism for efficient and reasonably priced banking services. I just wish the banks would figure out a way to make capital truly accessible to the middle class at reasonable prices. As you can see, 24 cents a swipe really adds up.