Wednesday, June 6, 2007

Walmart to offer prepaid VISA card

Walmart is going to start offering a prepaid VISA card, which in principle basically works like a debit card. Customers go to Walmart with a paycheck, load up their card, and can spend their card anywhere that accepts VISA. Basically, anywhere except 2 convenience stores in southern Alabama.

But Walmart already offers check cashing. In fact, they do it for $3, a flat fee. Their average check cashed is $300. I imagine many Walmart employees themselves take them up on this offer.

This isn't new. Check cashing places are already doing this. Here is one such card with some detailed information. Scroll all the way to the bottom. The card charges the cardholder $1.00 for every signature based transaction, and $2.00 for every ATM transaction (not including originating bank fees). Wow! That could really eat into your balance. Walmart has not released any information about its fees.

Another question I have, and someone who actually uses this service may be able to elaborate, is whether the card comes with the same penalties as a prepaid VISA "gift card". Ie, it expires, and/or they make it next to impossible to finish off a small remaining balance. On some cards you need to know the exact remaining balance to zero out the card, which means a phone call to the issuing company, or it won't run it. Most people don't bother with the hassle and throw out cards with pennies or dollars remaining, what I consider essentially a hidden fee.

Of course, this works out for VISA. They charge 1-3% of the transaction total to the merchant depending on the type of transaction (debit pin/credit sig). And keep in mind that as more people switch from cash to VISA, merchants are going to have to increase prices to make up for the fees. Any fee charged to the merchant is passed down on to the customer in one way or another.

VISA claims customers spend $300 a year on check cashing. Considering check cashing places charge $3-$5 for their services, that doesn't add up. A regular bimonthly paycheck would cost $72-$120 a year. VISA is claiming to reduce their check cashing costs to $130 a year. Where's the savings? VISA certainly wants Walmart to help them peddle their cards. With an average balance of $300 per check, assuming they 'cash' it for free, they still earn about $6 in merchant fees not including any cardholder fees. And there will be fees, particularly bill pay and ATM withdrawals.

Here's what I don't understand. Checking accounts are free. Most of them include free checks that cost only the stamp to send in your bills. They come with free debit cards. There are no minimum balances on zero interest accounts, and taking cash from their own ATMs is free. So I just have to ask, if Walmart really cared about its customers, why isn't it encouraging them to save a whopping $300/yr by opening a checking account rather than just promising to cut their fees in half. There are banks in Walmart, right there at the front. Just put up a big sign "Hey, open a free checking account, get free checks, and eliminate all your cashing fees!"

The VISA is great for VISA. For consumers? You get loaded with fees and its impossible to save anything unless you pull out cash from an ATM which, of course, hits you with a $2 fee plus $2-$4 depending on which bank you end up at. This doesn't reduce fees, it just shuffled them around and hides them. How is that good for Walmarts customers?

UPDATE: Walmart's prepaid VISA fees revealed

1 comment:

HustlerMan said...

I didn't know this. I'm usually on top of things like this. thanks