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This Prepaid Card Mimics A Bank Account

When American Express launched its Bluebird prepaid card account with Walmart in 2012, it promised to add new features that would make the card more like a bank checking account.

AmEx has now done that. But competing bank products launched since Bluebird was unveiled indicate there’s still some catching up to do.

When we reviewed Bluebird last year, we said that it may be the best prepaid card. And we’re still sticking to that.

The card remains the cheapest and most versatile prepaid card on the market and, in many respects, virtually indistinguishable from a traditional bank debit card, especially with the new features.

There are still no monthly, annual or activation fees; no electronic bill payment fees; and no reload fees. The only fees are $2 for adding cash to the card from another debit card if you don’t have direct deposit or for withdrawals at out-of-network ATMs and other places.

But starting now, money in Bluebird accounts is FDIC-insured, just like a regular savings or checking account.

As a result, certain Bluebird accounts can now receive direct deposits of government payments, such as Social Security payments, military pay and tax refunds.

Another new feature: You can now pay bills by check.

In order to pay someone by check, you first have to preauthorize the payment either online or with Bluebird’s mobile app before you write it to make sure you have enough money in your account to cover it. That protects you against insufficient funds and overdraft fees.

Check fees are a little steep. Account holders get one free checkbook until August 2013 and, if you have direct deposit, the second book of 50 checks is also free. After that, each subsequent book of 50 checks costs $26, including shipping, whether you have direct deposit or not.

There is one big caveat with these new features. They’re only available to customers who register with American Express for a “permanent” account. “Temporary” cards purchased at Walmart stores are not eligible.

While these new features are certainly an upgrade, Bluebird now faces competition that it didn’t really have last year.

Against these new competitors, Bluebird doesn’t stack up as well, mainly due to the steep prices it charges for checks.

These competing products are actual checking accounts and not prepaid cards like Bluebird. But they all carry many of the same functions and are aimed at the same types of customers, namely people who want cheap, hassle-free, mobile debit and checking accounts.

All of them are particularly attractive to so-called unbanked and underbanked people who can’t afford conventional bank accounts.

For example, in January Green Dot, the biggest prepaid card issuer, launched its new mobile bank account called GoBank.

GoBank has no overdraft fees, no penalty fees and no minimum balance requirements. You can deposit money and pay bills or send money easily and without charge.

While you can’t write your own paper checks, if you instruct GoBank to pay someone who can’t accept electronic payments, GoBank will cut them a check and mail it to them.

GoBank also offers a savings account component, but funds don’t earn interest.

More recently, Discover came out with a new Cashback Checking account.

In addition to no monthly fees and no minimum balance requirements, Discover Checking also offers free checks and free replacement cards. What’s more, it pays a 10 cent cashback bonus on every debit card purchase, online bill payment or check you write.

Both GoBank and Discover Cashback Checking are not yet available to all consumers but are slowly being rolled out.

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