You are here

Bank of America Hops Across the Blurry Line between Prepaid and Checkless Checking

Adam Rust's picture

Posted March 13, 2014

Instead of building a new Durbin-exempt prepaid debit card, Bank of America is creating a checkless checking account that is almost the same thing.  The best points of comparison to B of A's  Safe Balance are products like Liquid or GoBank.

As the name implies, deposits in a Safe Balance account are "safe" from overdraft fees. By itself, this is nothing new.

Consumers now have to opt-in to get overdraft on their checking accounts in the first place. What is new, though, is a B of A branded checking account that comes without conditions. Except for certain special populations, B of A has been asking people to establish a direct deposit or to maintain a minimum average balance. That will not be a hurdle with Safe Balance. 

Lacking that hurdle, Safe Balance means that B of A is putting its best foot forward in serving the underbanked.

In my opinion, Safe Balance is better than a small bank prepaid card (Simple, GoBank) because it has branches to offer to its cardholders.  Branches are a big difference maker, and not only because it portends a potential face-to-face relationship between customer and bank. I have to believe that people are going to have an easier time finding a B of A branch than they might a network fee-free ATM.

Safe Balance is better than a big bank prepaid card (Liquid) because it has billpay and outbound ACH.

Safe Balance's remote deposit service has got to be better than the one at GoBank. If it can clear a check in less than a week, then it will be hands down better.

Everything about Safe Balance is better than the Wells Fargo prepaid card, period. But that is not hard. Everything is better than a Wells Fargo prepaid card.

But for many people, Safe Balance is probably going to cost more than a Simple or Green Dot account. B of A won't waive the monthly fee if you make a direct deposit. Moreover, it would be great if there was some kind of pre-cleared check function, too.

A representative from another bank seemed dubious about the staying power of this product - or any product, for that matter - that cannot generate a reasonable rate of return. If there is a change of management, she said, new leadership would probably want to reconsider the motives behind the strategy.

That is the curious thing about this whole thing. It is important that B of A serves this consumer group, but why are they foregoing the opportunity to realize as much interchange revenue as possible along the way?  Bank of America is passing up the higher interchange that a Durbin-exempt prepaid debit card might have provided for them. No doubt, consumers benefit because Safe Balance can offer extra features that a Durbin-exempt card cannot. That's a great thing and it is a shame that the system is stacked against it happening more frequently.