JP Morgan Steers Low-End Clients To Prepaid Cards

May 8, 2012 | By
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A flag hangs on the wall of the JP Morgan company stall on the floor of the New York Stock Exchange in New York July 15, 2010. REUTERS/Lucas Jackson

NEW YORK (Reuters) – JPMorgan Chase & Cois seeking to move its least profitable checking customers into new prepaid debit card accounts to boost earnings in a business crimped by new regulations.

The cards work like checking accounts except that customers cannot write checks and overdrafts, and instead they pay with a swipe or by entering the card number on a website.

A loophole in the 2010 Dodd-Frank financial reform law allows banks to charge merchants higher fees for processing payments made with this type of debit card.

Chase said on Tuesday it will market the cards – with a relatively low $4.95 monthly fee – mainly to people who frequently overdraw their accounts, keep low balances, or do not qualify for a checking account at all. It is not adding extra fees for deposits or withdrawals at its ATMs or branches.

The move could pressure other debit card issuers to reduce fees and could prove to be a low-cost way for the industry to provide basic financial services to people who live paycheck-to-paycheck.

These customers have become a millstone for banks across the country after new U.S. regulations limited overdraft fees that banks can charge. A prepaid debit card cannot usually be overdrawn.

Chase, the bank’s retail arm, hopes the prepaid debit card will help it avoid the negative publicity that overdraft fees can garner. Many consumer advocates view those fees as a stealth tax on the poor.

Read the whole story:  wibqfm.com

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Category: COMMERCE, NATIONAL

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