While the past few months have seen millions of Americans nervously ogle their mutual fund holdings, money market accounts, and credit card bills, millions of other Americans continue to live their financial lives completely outside. of this system. The numbers vary, but according to one widely cited estimate, 10 million American households do not have a bank account. And many businesses sell financial alternatives to the “unbanked” – check-cashing venues, for example. In recent years, another alternative has emerged: Instead of converting a paycheck to cash, prepaid cards allow users to pour it into a piece of branded plastic. Aside from competition on the basis of price (check cashing fees can be brutal) and convenience (a prepaid card can be used to pay a utility bill online, for example), at least one some of this plastic claims to offer something less quantifiable.
Consider, for example, the Prepaid Visa RushCard, the product of a partnership between Unifund (a Cincinnati company known for buying and collecting bad debt) and Russell Simmons, founder of Def Jam records and the Phat Farm clothing brand. According to an advertisement, “entrepreneur and philanthropist” Simmons designed the card because he “believes everyone should be able to afford it.” There is no credit check, and obviously you don’t need a bank account. “We created the prepaid RushCard,” Simmons explains on the spot, “so that everyone has access to the American dream.” It seems a bit bland to someone with Simmons’ brand-building panache, but recently in The Economist, Simmons gave his speech a bit more spice by suggesting (in terms that can only be paraphrased here) that the card has aphrodisiac properties.
The point he made, although earthly, was that plastic and status are closely linked in contemporary America. Ram Palaniappan, chief executive of RushCard, offers the more sober wording that the cards are meant to offer the “dignity” of inclusion to consumers otherwise left on the fringes of American money culture. So, this RushCard TV spot depicts respectable middle-class types shopping in department stores or collecting the check on behalf of a friend who has money. Palaniappan claims the company has issued 1.5 million RushCards since 2003 and believes the card is poised to perform well in today’s economy, in part because more people will find themselves pushed to the margins but still desiring the card. convenience – and status – of plastic with a credit card logo on it.
There are two versions of the RushCard, one with a sleek black design and the other in pink and featuring the logo of Baby Phat, the trendy women’s clothing line. But Palaniappan quickly overtook the appeal of the RushCard for the brand: “We really focus on helping people,” he emphasizes. “When our client deals with us, he’s someone who understands their situation. Not just compared to check-cashing venues, he says, but compared to traditional banks, which can impose severe overdraft fees on minimal savers who slip and fall below the minimum balances required when filling the bank. petrol tank. And he points to the recently added “RushPath to Credit” feature, which reports debit transactions to a credit bureau, on the theory that it will help the user create a positive profile.
Yet the RushCard is an entrepreneurial business, not a philanthropic business. And one criticism of prepaid cards – Wal-Mart offers one, like others – is that this “empowerment” comes at a price: the RushCard costs $ 19.95 to obtain and $ 1 per transaction to use (these fees are capped. at $ 10 per month). Using one to withdraw money from an ATM costs $ 1.95, plus whatever the ATM owner uses. While direct deposits are free, there are fees for adding money in the form of cash (in services like MoneyGram or CheckFreePay) or paper checks. If it seems like a lot to pay for the privilege of spending your own money, well, that’s a pretty common scenario for the unbanked. Prepaid cards may work better than other options, like those high-fee check-cashing stores, although, as with any monetary instrument, the details depend on the situation – and behavior – of the consumer.
After all, a real credit card can represent interest-free loans made by a discerning consumer, or it can represent ruinous debt. It seems odd that showing off a piece of plastic that could be driving negative net worth could represent social status worth emulating, but it surely is: the currency that the RushCard and its competitors are helping users. to manage is, at least in part, social gender.