Recently, Business Insider gave a glowing review to Chase’s new prepaid debit card, the Liquid. Unfortunately, it seems that Business Insider is easily impressed. While the site concludes that the Liquid “actually looks like a decent product,” we got our hands on the card’s terms and conditions and came away with a completely different impression. After reviewing the card for ourselves we can confidently say that the Liquid prepaid debit card is anything but “decent.” In fact, it’s pretty terrible. Here’s why.
Like the Suze Orman prepaid card, it’s not clear what purpose the Liquid prepaid debit card serves. Unlike a regular debit card, prepaid debit cards aren’t associated with any particular bank account. Instead, cardholders have to load their own funds on the card electronically or through an ATM before they can buy anything. This makes the card function like a checking account, only without any of the benefits of a checking account, like the ability to write checks. And that’s not even the worst thing about the card.
The worst thing about the Liquid card is that while the benefits of an online checking account may be missing, all of the fees that banks like Chase love to charge are there en masse. To use the Liquid card, customers have to pay a $4.95 monthly service fee. Additionally, they’ll also have to pay $2 for using a non-Chase ATM to add or withdraw cash.
To be fair, this isn’t as bad as the bevy of fees that other cards charge for arbitrary things like receiving account alerts, withdrawing any money whatsoever or failing to meet minimum monthly deposit requirements. However, the fundamental problem is still there. And considering the tricks Chase has been up to recently, that sweet freedom from fees the Liquid offers isn’t guaranteed to last.
You might recall that earlier this year Chase attempted to charge checking account customers a $3 monthly fee for using a debit card. Though the move was nixed due to a ferocious customer backlash, it’s not ridiculous to suggest that Chase will eventually try to bump up the fees on the Liquid as well.
This is especially true when you consider the primary demographic Chase is appealing to here. Like every other prepaid card issuer, the bank is using the Liquid to go after America’s 17 million un-banked and under-banked citizens. These people tend to be undereducated as far as good financial practices are concerned, and they often have poor or no credit ratings. Consequently, they tend to see prepaid debit cards as the easiest or only way to get a piece of plastic in their wallet.
Unfortunately, most banks see this crisis as a business opportunity rather than a chance to do something genuinely useful. Instead of creating specialty credit cards and easily accessible checking accounts, they push these prepaid cards that do nothing but extract fees from unwitting customers. So, going to back to Business Insider’s review: is the Liquid card a decent product? Hardly. It’s less toxic than other prepaid debit cards, but it’s just as useless in the long term.
If you’re considering signing up for a prepaid debit card, we strongly recommend opening a checking account at a local bank instead. It’s a safer way to manage your money, and the bank will be happy to provide you with a debit card that can do everything the Liquid card does and more.
And if you’re attempting to rebuild your credit rating, we’d like to remind you that prepaid debit cards do not report to the credit monitoring bureaus. The only way to improve that three-digit number is to get a legitimate credit card, like the Capital One Secured card, that will monitor your spending.
Getting your finances in order isn’t easy, but it is possible, even for someone with terrible credit and a ton of debt. However, prepaid debit cards aren’t the way to do it, and we don’t believe that they ever will be.