Random thoughts on a variety of subjects
By Sam Redman
A recent article in the NyTimes about the growing popularity of the debit/credit cards available in many of the pharmacies, such as Walgreens and CVC, and at Walmart implied some characteristics to the cards which are simply not factual. You can read the original article here.
A few readers might misinterpret some of the information in the article about the requirements for these cards and their distinctions from ordinary bank debit card accounts. First, these “store cards” are bank accounts (they are just not traditional bank accounts). If you look at the fine print on the card and on their websites you will see that you are establishing a bank account at the particular bank which is actually providing the service. There are only some convenience differences. With the store cards, you don’t have to go into a bank to create the account. Plus, you don’t have to go to a bank to make deposits (or use drive-throughs). With the “prepaid” store cards you merely have the convenience that the start up and future deposits are done at store cash registers and further, these stores have extended open-for-business times (some 24 hours) to make deposits and they are open on many days (like holidays) which banks are not.
The distinction described that they don’t require credit checks is no different than most banks. Very few banks do credit checks to start their basic level accounts, which include debit/credit cards (I have directed several employees, who had not started bank accounts, because they thought you couldn’t without good credit, to Capital One and also to a locally owned bank. Both of those did not require credit checks.
And the other bit of miscommunication is that these are somehow a way for someone to get a card without normal governmental identification (immigrants were mentioned, from which one might infer that the reference was to illegal aliens). But in order to activate the card you must call a toll free number and provide your name, address and social security number. As explained on the Walmart site, “this information is needed to comply with counterterrorism laws.” If what you supply “doesn’t check out,” their site says, they will “refund the money” which you put on the card at purchase. Banks often do require a driver’s license or a state id card and perhaps that might be the only distinctive difference (but, anyone who does have a social security number can get a state id card in a matter of moments at local offices where driver’s licenses are issued).
So the real difference here is not who can qualify for one or that these are not “bank accounts,” but the convenience of not having to deal with a bank directly to make your deposits (and being able to deposit at unlimited times). While many of the store card features duplicate conventional banks, such as payroll deposit and incoming wire transfer and online account management, the banks have a few advantages such as outgoing and between account transfers, as well as no limits on deposit amounts, plus the benefit of being able to deal with a live local manager who can sort out problems face to face.
I do like the convenience of the Walmart card for certain internet purchases where I don’t wish my ordinary bank cards to be exposed (and those in-store cash register deposits are nice). But all these cards do is create the illusion that someone doesn’t have a bank account, which you must acknowledge is a very clever marketing device.