American Express is adding cash back, a popular credit card feature, to its prepaid debit cards as it seeks users beyond its traditional customers.
The company has long relied on the corporate traveler and the well-to-do, but increased competition has forced it to look at new customers. Prepaid cards, which appeal to lower-income Americans and people who don't have traditional bank accounts, are a small and growing business.
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CEO Kenneth Chernault has said American Express would spend heavily this year to create new products and keep its already existing customer base.
On Wednesday, AmEx will release a new Serve card that will give users 1 percent cash back on all purchases. It's the first time a prepaid debit card has offered cash back for every buy. Some prepaid cards offer cash back at certain retailers.
The monthly fee will be $5.95, so you have to spend roughly $600 a month to break even on the card.
AmEx entered the prepaid debit card market three years ago with a co-branded card with Wal-Mart called BlueBird. It launched Serve cards in 2013 aimed at consumers looking for a cheap alternative to a bank account. They have a monthly fee of $1, among the lowest in the industry.
Prepaid debit cards have become a product of interest for banks and regulators alike in recent years. Originally a product with high fees and limited uses, they have in many ways become bank account replacements.
Other recent card tweaks: Another new Serve prepaid card, announced earlier in August, that allows unlimited reloads. It's aimed at workers paid more often in cash, like waiters or bartenders, and has a monthly fee of $4.95.
Cash reloads on the current Serve card were $3.95 each, so the new card's monthly cost could be significantly cheaper for certain customers.
AmEx Serve customers have loaded $7 billion on their cards since launch and year-over-year spending tripled, said Stefan Happ, AmEx's chief commercial officer of enterprise growth.
Still, Serve and BlueBird don't have a significant impact on the company's profitability.