Wal-Mart Slashes Fees on Prepaid MoneyCard As Economy Slumps

Wal-Mart Stores Inc. on Wednesday slashed the pricing it imposes on its prepaid Visa card, cutting the activation fee by nearly two-thirds, the reload fee by 35%, and the monthly maintenance charge by 39%. Since it rolled out its MoneyCard in June 2007, Wal-Mart has sold 2 million of the plastics, and cardholders have loaded them with some $2 billion in value, the Bentonville, Ark.-based retailing giant reports. Wal-Mart announced the new pricing as part of a promotion aimed at stressing the money its stores save Americans at a time of economic gloom. A spokesperson says the chain dropped its MoneyCard fees in response to hardships sustained by the card's core customer base. MoneyCard is aimed chiefly at low-income customers, many of whom are underbanked. “In these tough economic times, we think we can do more for our customers who may have low bank accounts or no access to credit cards,” she says. The card can be used for online payments and ATM withdrawals as well as point-of-sale transactions. Under the new pricing, which is effective immediately, the activation fee plunges from $8.94 to $3. That's well under the industry average of $9.99, says Brent Watters, a senior analyst at Maynard, Mass.-based Mercator Advisory Group who studies the prepaid card market. The fee to reload the card, which holders can do with cash at Wal-Mart stores as well as locations linked by the Los Angeles-based Green Dot Corp.'s reload network, dips to $3 from $4.64. The monthly fee is now also $3, down from $4.94. The industry average for both fees is $4.95, according to Mercator. “On reloads, $3 is very aggressive,” Watters notes. As has been the case since the card was rolled out, holders can avoid reload fees by using direct deposit or by cashing their paychecks at Wal-Mart stores. Also, the retailer waives the monthly fee if cardholders load at least $1,000 each month. While the MoneyCard's pricing was already below industry averages, Wal-Mart predicts it will sell many more of the plastics with the new fees and with consumers looking for ways to cut costs and avoid tapping credit lines or creating account overdrafts. “We expect more and more customers to turn to MoneyCard,” the spokesperson says. Still, there may have been a competitive motive behind the pricing move, Watters says. Many merchants are now looking seriously at introducing their own general-purpose prepaid cards, he says, in part because of the run-up in sales that they saw for open-loop cards in the days leading up to Christmas. “What drove this [interest] was holiday sales,” he says. “With open-loop cards, there was just a mad rush in the last 48 hours before Christmas. That opened [retailers'] eyes.” One unnamed major merchant is expected to introduce a card “in the next few months,” he adds, that “will rival” the MoneyCard. But the Wal-Mart spokesperson denies the new pricing has anything to do with blunting expected competitive moves in prepaid cards. “We were ahead of the pack in this space already [with respect to pricing],” she says. Watters agrees the card had been positioned below competitive pricing from the time of its launch. “The product has been attractive, and this [new] pricing makes it more attractive,” he says. Wal-Mart tested the MoneyCard for more than six months before launching it commercially on the Visa network (Digital Transactions News, June 25, 2007). GE Money Bank issues the card.