NEW YORK — American Express Co., known for its high-end credit and charge cards, is continuing its push into the growing prepaid debit card market through a partnership with Target Corp.
The New York lender said Tuesday it is selling the American Express for Target Card, a reloadable prepaid card, in more than 1,000 U.S. Target stores. American Express and the Minneapolis retailer earlier this year announced they were testing the sale of the cards in some stores.
Prepaid cards function like a traditional debit card but are not connected to a checking account. Many nonbank companies, including Green Dot Corp., NetSpend Holdings Inc. and Western Union Co., have been marketing the cards to low-income consumers through convenience stores, pharmacies and other retailers.
Wal-Mart Stores Inc. is one of the largest sellers of prepaid cards through an agreement with Green Dot and GE Money Bank, a subsidiary of General Electric Co.
Green Dot and NetSpend executives contend they could benefit as banks tack on new fees for checking accounts and other financial services, forcing some consumers from the banking system to their products. Experts also say mainstream lenders may begin selling their own prepaid cards, which are largely exempt from new rules that limit how much in fees large banks can charge merchants for accepting debit cards.
U.S. Bancorp recently announced it had begun selling prepaid cards through its 3,000-plus branches. BB&T Corp. also rolled out a prepaid card earlier this year.
Consumers loaded $40.85 billion on general-purpose prepaid cards in 2010, up from $19.46 billion in 2008, according to Mercator Advisory Group.
American Express has been pushing into new products as it tries to expand beyond the credit and charge cards that it typically has issued to well-heeled consumers. In June, it announced its general-purpose reloadable card, which it has been distributing online. Its new mobile payments service, Serve, allows customers to pay for purchases using a prepaid account that can be funded with other credit cards and bank accounts.
Customers can use its new Target card at any merchant that accepts American Express.
It costs $3 to load funds onto the card at Target stores. Customers can also reload funds online and over the phone.
The card can be used at automated teller machines, with the first withdrawal of every month being free. Subsequent withdrawals cost $3.
Unlike other prepaid cards, which have come under attack from consumer groups for carrying hidden fees, the American Express for Target Card does not carry fees for monthly usage, balance inquiries, alerts or card replacement.
American Express's shares were down 39 cents at $49.06 in recent trading. Target shares rose 7 cents to $52.72.