RushCard's $2 Rebate: A Sticky Product or a Sticky Situation?

A new rebate program from UniRush LLC is the latest attempt by a prepaid card marketer to make its product as sticky as a bank account without generating a backlash from its fee-sensitive audience.

The risks associated with such a move are severe — the infamous Kardashian Kard, for example, attempted to lock in customers by charging up to a year's worth of fees up-front and was quickly shut down under accusations of being predatory.

UniRush, which actually charges a higher monthly fee under one of its pricing plans than the Kardashian Kard did, has so far weathered accusations that it takes advantage of the underserved.

"More people are leaving banks and coming to us than people are leaving us and going to banks," says Russell Simmons, UniRush's founder and an entertainment mogul. "We are trying to build a sticky customer and we are trying to be trustworthy for them."

UniRush's rebate system can be attached to any card. It provides a $2 monthly rebate to users who maintain an averaged balance of at least $500 across all of a customer's accounts.

The company charges between $3.95 and $14.95 for each card. Users then pay a dollar a transaction for up to 10 transactions or $9.95 a month, depending on the pricing plan they choose.

The rebate program, which has been piloted for about a week with roughly 1,000 RushCard users, was initially envisioned as a savings account. It has since been rebranded as a "goals" program. It is currently available to all users and will be widely marketed by the end of November.

Simmons plans to launch other new financial services by early 2012. These include loans for underbanked consumers and a system for providing faster access to directly deposited funds.

Experts say the rebate program's requirement of a $500 balance might make it too expensive for the RushCard's audience, since many prepaid users prefer the products over bank accounts because they feel gouged by fees banks charge for low or negative balances.

As such, UniRush's rebate offer might apply only "in the narrowest of circumstances," says James Van Dyke, the president and founder of Javelin Strategy and Research. "I'm having a hard time thinking about where they could offer that to the masses in a majority of low-income cases."

Another expert says the rebate might turn out to be more a publicity stunt than a useful feature to the RushCard's audience.

"It's an interesting marketing initiative to help exploit some of the negative publicity going around with the banks," says Tom C. McCrohan, managing director for equity research at Janney Montgomery Scott in Philadelphia. "It doesn't change much for the value proposition."

The card faces other potential risks to its reputation.

In May, Florida's attorney general announced an investigation of UniRush and several other prominent prepaid card providers for their fee disclosure practices.

"Regulators do have questions and they are watching very closely," Simmons says, but he disputes "the idea that I'm not transparent."

The RushCard's fees are spelled out on its website and "we say it in our commercial 50 times," he says.

In a further example of transparency, Simmons recently made several posts on his Twitter account stating clearly that the fees for the RushCard total nearly $120 a year.

"The whole industry … will see that we are very useful to a lot of underserved" people, Simmons said. About 2.5 million consumers use the Prepaid Visa RushCard, according to UniRush.

Simmons has recently come under fire for vocalizing his support of the Occupy Wall Street protests while also boasting of the perks of his personal wealth.