I pioneered the prepaid debit card space with RushCard nearly a decade ago as a vital utility for the 60 million Americans who are either un-served or underserved by the traditional banking industry.
I pioneered the prepaid debit card space with RushCard nearly a decade ago as a vital utility for the 60 million Americans who are either un-served or underserved by the traditional banking industry.
More recently, rising bank fees and the rising value of alternative services like the Rush Card have made prepaid re-loadable debit cards a smart option for the American middle class. RushCard has evolved a tremendous amount with a suite of money savings tools that are saving our customers on average $422.90 a year on top of savings from bank fees.
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RushCard has experienced significant growth in the last few years, not because consumers are ignorant, as several articles patronizingly suggest, but because consumers are wising up to a whole array of old and new fees on the so-called “free” checking accounts.
And because services like Rushcard go far beyond providing access to electronic payments: offering budgeting tools that really help save money, mobile and social media features, text alerts, prescription and healthcare discount services, and many other services you don’t get with most cards.
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Just today we announced the RushCare Healthcare Discount Plans which enable our customers discounted access to vital healthcare services. Along with our other services, which our consumers say save them on average $420 a year (1), Rush Card is an empowerment program.
Here are some common questions that I feel need to be addressed for consumers and the media to really understand what Rush Card does and why it’s a fantastic option for millions of Americans.
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“Why don’t consumers just get a free checking account?”
More than half the Rush Card account holders can’t get conventional bank accounts. Banks either refuse them any access or drop them because they’re too small or perceived as too risky or both. It’s not like they’re not trying.
Few if any banks are interested in the business of working people who live paycheck to paycheck because this business is unprofitable for them. Unlike Rush Card, most conventional banks have vast brick and mortar infrastructures and layers of bureaucracy to allocate to customers; we have a fraction of the bank’s overhead and use technology and partnerships to keep our costs low.
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“Rush Card charges people money to access their own money. That’s not fair.”
The Truth: everybody charges money to process payments. Why? Because it costs money to process payments. If your average checking balance is over a certain amount, say $5,000, the bank makes money by lending out the money from your “free” checking account and charging interest on those loans. But if, like most Rush Card customers, your average balances are in the hundreds of dollars, the banks rely on you bouncing your checks to make money on your account. In 2009 banks made $38 billion in non-sufficient funds (NSF) fees and overdraft (OD) fees.
Without this huge hidden subsidy – which disproportionately hits the working poor, minorities, immigrants and students – they would not be in the consumer banking business except for the well-off. Now that those fees are rightly being regulated the press is full of stories about banks charging new fees to make up for their old revenue (2); or are simply offloading the customers to lower cost service providers like RushCard.
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“Prepaid Customers are paying too much for their cards.”
The real story is that customers pay too much for their bank accounts. JP Morgan Chase estimates that it costs approximately $300 per year to provide a checking account.(3) The average cost to the consumer is $360 – $551 per year.(4)
Banks charge their customers too much and don’t do enough to help them.
I feel like I have been screaming about the benefits of this service from the mountaintops and hills. Even the nation’s leading bank, JP Morgan Chase, acknowledged this fact in a 57 page report written in September 7, 2010, in which it said, and I quote: “Fees Can Make Maintaining A Bank Account Expensive: “not so free checking” (5). With rapid deployment of technology, a fraction of conventional overhead and a higher value proposition, Rush Card’s business model is always going to be the low cost provider of payment services to most working Americans, which is why we’re growing as conventional banks shed customers. It’s time the press gets the memo.
[1] classic.cnbc.com
[2] Bretton Woods Inc, 2009 Fee Analysis of Bank and Credit Union Non-Sufficient Funds and Overdraft Protection Programs.
[3] money.cnn.com
[4] Analysis of Reloadable Prepaid Cards in an environment of rising consumer banking fees, Bretton Woods, February 2011
[5] Comparing cost of Prepaid vs Traditional Checking Accounts JP Morgan, September 2010
