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Welcome to the 55th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.
In this week's Wal-Mart Weekly, I'll be looking at the entry (although indirect) of Wal-Mart Stores Inc. (NYSE: WMT) into the consumer banking industry. While it may seem a stretch to think that Wal-Mart's new debit card program is anything but a way to help consumers, it could be positioning the retailer as a new banking partner for many consumers as well as adding handsomely to the retailer's bottom line.
You have to make money to spend money
Wal-Mart recently discontinued its Wal-Mart Debit/ATM card, but has now replaced it with a newer "debit card".
What's the difference, you ask? Let's break it down a bit. First, Wal-Mart's previous debit card was just that: an in-store debit card to prod more consumers into spending money in the store, regardless of credit history, credit card access, or checking account access. It's no secret that millions of U.S. shoppers have credit issues and either are overloaded on credit debt in the first place or can't receive a credit card at all due to past financial history.
Of course -- like any good retailer -- Wal-Mart does not want to lose any business. Therefore, providing an alternative way for lower-income shoppers and those with spotty credit to continue bringing business to the checkout line is a huge priority. Wal-Mart's motto is currently "Save money. Live better." Although the world's largest retailer likes to talk about moving away from "low prices" as its main competitive advantage, that may never happen. Wal-Mart's brand identity revolves around the low price image, and it knows it.
But when the retailer decided to do away with its in-store ATM card, you can bet there was a very decent replacement coming up. It's here -- and it's more than an in-store prepaid debit card. Wal-Mart's new "MoneyCard" is actually a refillable debit card provided for use on the "Green Dot" network. Of course, Wal-Mart's MoneyCard can only be used at Wal-Mart. The guise I see is this: Wal-Mart wants those who don't have credit cards or bank accounts to "load" their Wal-Mart MoneyCards directly from their paychecks. In fact, if you cash your payroll check at Wal-Mart, you can load any portion (even all) of it directly to your Wal-Mart MoneyCard.
The Wal-Mart Bank has arrived
This time, though, it's different. This new Wal-Mart MoneyCard is like a standard debit card by any issuing bank in the U.S. For many, a debit card pulls funds out of a standard checking account (backed by real money in the bank, not a credit loan). In fact, I would go as far to say that the paper check has been almost displaced entirely by the debit card for millions of U.S. consumers, based on the straw poll I took this week among people I know. Imagine this: you have no bank account, but you have direct deposit from your employer. All of your paycheck funds go directly to your Wal-Mart MoneyCard. You then use that money card for everything:
- Paying bills on the web
- Internet shopping
- Paying for gas at the pump
You basically have a bank account without the bank. Since credit and debit cards are universally accepted almost everywhere worldwide, you can buy anything at anytime at any place with a "loaded" Wal-Mart MoneyCard. Does this sound like Wal-Mart has entered the banking business to you? In a clever, indirect way, yes. Sure, this may not fit the profile of a standard bank account, and your funds aren't insured by the FDIC since this is not a bank account. Still, getting customers to load their paychecks onto a debit card that can be used anywhere for anything is powerful. The most powerful thing of all: the card is branded Wal-Mart. Think that's not powerful? Take a peek at a marketing textbook.
As a MoneyCard holder, Wal-Mart has you both ways
And don't think those fees are something Wal-Mart won't be collecting -- it does. Although Wal-Mart's MoneyCard fees are competitive, the fees are still there. The retailer has an initial activation fee of $8.94 and a monthly maintenance fee of $4.94, which goes right along with its store-level retail pricing (ever see a price in Wal-Mart end in $.99?). There is also a "reload" fee of $4.64, but that is canceled if you set up your Wal-Mart MoneyCard as a recipient of your paycheck direct deposit.
Further, that $5 "maintenance" fee is waived if the card user reloads $1,000 a month or more to the MoneyCard. ATM withdrawals also have a fee, but are free if you wander into a Wal-Mart location and get cash from a register using your card. Again, does this sound like a pseudo-banking process? Like or not, Wal-Mart has a bank operation, even if it does not fall under the definition of a regular bank. The processes, fees, and customer marketing and usage targeting alone makes the Wal-Mart MoneyCard a banking operation -- at least from the eyes of a customer.
Wal-Mart's array of fees is not unlike a check-cashing service or any other banking operation where standard checking accounts are the product of the day. However, the retailer's fees are in each case very competitive or a touch cheaper than competitive services. So, not only is Wal-Mart trying to keep its brand in front of as many U.S. consumers as possible, it's giving breaks to standard banking fees at every corner with its newer MoneyCard and, in a way, is now beginning to compete head-on with the standard bank and the standard checking account scenario where millions of U.S. consumers already have debit cards at their disposal.
After all, the prepaid cellular service industry is huge due to the lack of credit or unwillingness of many to be unable to qualify for credit-based services. This is simply the application of a prepaid debit card scenario from the gates of the world's largest retailer. Wal-Mart wants you to use the card in its stores (and there are incentives for that at every turn). If you use its MoneyCard outside of Wal-Mart's universe, there will be fees on those actions that undercut the competition. So, Wal-Mart wins both ways, which of course is its purpose. Keep your friends close (regular Wal-Mart shoppers) and your enemies closer (MoneyCard holders who shop more outside of Wal-Mart).
Although Wal-Mart was not officially sanctioned as a bank in 2007, it sure has an operation here that emulates one strong aspect of most banks -- racking up as many transactions as possible. And Wal-Mart thought profit was only in retail product sales. Like any growing company knows, any action that generates microsize fees or payments of any kind is coming up fast as a real profit generator. Or, no big deal if you have a keen eye for cash outlay -- just shop at Wal-Mart instead and save those fees.
Join me right here this time next week for another edition of The Wal-Mart Weekly. Until then, have a great week.
Update, 4-10-08: Wal-Mart's newest debit card offering launched in July 2007, and its previous card was discountinued in February 2007.
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Reader Comments (Page 3 of 3)
4-15-2008 @ 2:17PM
Sheri said...
Ok.... I love this card.... My husband and I are a younger couple and like most other Americans, live beyond our means... Am I proud of this? Not at all however, we don't have the kind of income that allows us to give our kids what the other kids have and do what the other kids do... With our previous bank account, we overdrafted ALOT!! And honestly, it was intentional overdrafts... We knew that we would be paying high overdraft fees but at the time, we didn't care.... All we knew was that we needed the money then and we knew that once our checks were direct deposited, our balance would once again be positive... I once sat down and figured out that I was losing hundreds of dollars from overdraft fees!! I have since closed our bank account and we now have the Walmart Money Card.... NO MORE OVERDRAFTS!! We actually HAVE to live within our means.... There is no overdrafting and since we load (direct deposit of our payroll checks) over $1,000 monthly, we do not have any monthly fees.... The only fees that we would ever have to pay, is if we used an ATM and we never do that... If I am going somewhere that does not except VISA, I simply get cash back from a store and do not have to pay a dime to do so.... So, I am very happy with the Walmart Money Card.... I believe that it will keep alot of people, like myself out of financial suicide!!
4-15-2008 @ 4:10PM
stevelaf said...
WalMart is making money 2 ways. One in fees and 1 in unused funds each month. Ex. 1 million cards issued, every body puts $1,000 on card and spends $995. leaves 5$ at end of month on each card times 1 million cards = $5 million a month walmart is drawing interest on. As time goes by cards get lost, people die and cards lost. This is all money sitting in Walmarts account that is unregulated and who knows who ownes it. American Express is getting rich off unused checks. Buy American-use a local bank.
4-15-2008 @ 5:30PM
Tonya said...
The Walmart Money Card (prepaid Visa debit card) is perfect for people that have a problem with maintaing a checkbook or have credit problems that will not allow them to open a checking account. Amounts that you load or reload on a Wal-Mart MoneyCard are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the maximum amount provided by applicable law. If you do direct deposit, the only fees are the monthly maintenace. If you load $1000 or a month the monthly maintenance fee is waived. You can use the card anywhere you can any other debit or credit card. The card is issued and maintained by GE Money Bank. So how does that equate to Wal-Mart being in the banking business. At least with the WalMart money card, you do not have all of the fees that you do with all of the other prepaid debit cards.
4-15-2008 @ 8:56PM
peches said...
hello !! Wake -UP !! Walmart is trying to help, They are giving you another choice, you dont have to go there. Most of you dont even really read or listen to what anyone says about Walmart. Instead "Oh, Walmart's the devil"!!! I work really hard for what I get, and I'm not going to waste anymore of my money than I have too. Money goes to fast and life is to short. Walmart isnt perfect, but where would we be without them?? Let's see, how many jobs in the USA do they employ ?? hmm... Start counting.....................
4-15-2008 @ 10:15PM
dave said...
Ask a W.VA.coal miner family about script!! you got paid in script and the only store in town that you could spend your script was at the coal mine owned store !!!!! And yes they would run a tab for your family!! MMMM they say history repets... think about it ??
.
4-16-2008 @ 1:55PM
Wynter said...
This crap is just like PayPal. If you are not familiar with PayPal or have not YET been screwed over by PayPal, go check out PayPalSucks dot com You will see the horror stories. PayPal gets by with freezing your funds, stealing money from you, and nothing can be done to them. WHY? Because they are NOT a bank. They tell you AFTER they screw you to read the fine print, they have the right to do whatever they want with your money. I have never used a walmart money card, but it is very similar to PayPal as far as the using a back door to become a bank, but NO insurance and in the fine print, you can't do crap to them, but they can do whatever they want to your money! I would check it out if I were anyone thinking of using this card. READ THE FINE PRINT. There has GOT to be something wrong whenever it seems to be too good to be true.
4-16-2008 @ 1:57PM
Wynter said...
Again, go to http://www.paypalsucks.com to read the horror stories of "banking" with a company that is NOT a bank nor is it FDIC insured.
Just trying to help. I have nothing to lose or gain if you use a money card at Walmart, just trying to make people aware of how close this scheme seems to be to PayPal.
4-16-2008 @ 10:09PM
Carolyn said...
Walmart sucks! We had a super store come to our little town and it has made the traffic unbearable, the cops are always in the parking lot, not protecting our town and they don't give a damn about what the consumer wants. They have all but eliminated the craft dept. The employees hate their jobs and it shows in the customer service!
4-23-2008 @ 8:17PM
Barb Johnson said...
Since I have very good credit with companies whom I have used my credit card for many years why should I want to go thru the route of a new card. As for debit cards if you don't have a checking account which can be accessed by these debit cards (which for myself this would be an open invitation for anyone to just go in and do whatever) then it is far better to use a card where a company or people can't access the account unless there is a monthly statement and you personally get online to pay the bill.
4-23-2008 @ 8:58PM
Toni said...
THE EVIL EMPIRE STRIKES AGAIN,AS A FORMER EMPLOYEE, I KNOW FIRST HAND HOW UNDERHANDED THEY ARE.THE BOTTOM LINE IS ALL THAT IS IMPORTANT TO THEM,THEY DO NOT CARE ABOUT PEOPLE.
4-24-2008 @ 6:16AM
TRISHA said...
I live in Southern Calif, and I have only seen one Walmart in a bad area and that was in San Jose...I do shop alot in Walmart, and have seldom been dissappointed in goods, I have purchased. I don't care much for the prepaid debit cards, it's not for me, but I can see that it may be a good thing for others.......As long as my income is fixed on the low side, I will continue to shop where my money goes the farthest. I went once to a Super Walmart and I liked it. Sadly there isn't one in my area.
4-26-2008 @ 1:13PM
cathie said...
What is the matter with you crazy people? If you don't like Wal Mart don't go in. I love the remark from one nut saying the quality of the workers in sub standard. Why are you going in there? Oh the prices are lower and the check cashing is cheap. Why would you want to buy toilet paper at S&S for 7.49 when Wal Mart is 6.25? Stay out of Wal Mart and pay more some place else. God Bless America
5-05-2008 @ 3:58AM
Karin said...
Yep...it's just like the PayPal pre-paid card. The only difference I can see is that PayPal doesn't offer direct deposit, while the Wal-Mart card does. Wal-Mart isn't the first to offer them. A lot of check cashing places also offer them, like the the Netspend card. Personally, I can't get a checking account right now thanks to a bad situation where I purchased a high dollar item for my previous employer, which then decided not to reimburse me for three weeks. Checks bounced, and I lost my account because of the mess. So...these types of cards are the only way I can have anything like a checking or savings account for now. For people like me, they are a godsend. I'm now a self-employed freelance artist and 100% of my business is conducted online. A few of the agencies that represent my work are in Europe, and the only way I can get paid is by having direct deposit. The check cashing places where I live will not cash checks from outside the country, and I can't cash them at any bank, because I don't have an account. So I have to rely on these types of cards in order to get paid. That's why I have a PayPal card, and why I have another one with a checking account number associated with it. I just don't have any other options. I wish I could open a checking account and have FDIC insurance, but with my low income as a self-employed artist, it isn't possible for me to pay off my old checking account at this time. In the 8 or 9 years I have used these types of cards for various reasons, I have never been ripped off or charged any exorbitant fees. Not once. In fact, I actually save money, because I completely avoid the possibility of overdrafts. Unlike a traditional debit cards attached to checking accounts, it is impossible to go over the limit, because the cards are pre-paid. And every single card I've ever used has policies in place where monthly fees and/or reloading fees can be avoided, so the only charge a person ever sees is the initial set-up fee. A few even act as savings accounts and earn interest as money market accounts, and offer cash back incentives if the card is used as a credit card. The thing that appeals to me most about the Wal-Mart card is the fact that the store is right in my neighborhood just down the street (and it's a nice neighborhood, too!), which means I don't have to trek to an inconvenient check cashing place in a seedy neighborhood anymore. I shop at Wal-Mart several times a week anway, whereas the check cashing place is out of the way and nowhere near any of my regular shopping stops. As a person who chooses to not own a car and instead walks or buses everywhere, convenience and accessibility is important. One of these days I'll be able to return to regular banking, but in the meantime I'm really grateful for pre-paid cards like Wal-Mart's.
6-17-2008 @ 1:35PM
Joe said...
I've only read the first page of comments so far. Some of you have valid points and others are just... well retarded. I've been using the card for a few months now for direct deposit of my military pay and untill recently have had virtually no problems. At first my only issue was not being able to understand the customer service representatives. I like getting things done in a timely manner so naturally this irritated me. The other problem I've ran into is an inability to utilize their online bill pay service. I am currently away from home and it could greatly improve the efficency with which I pay bills. I don't have a vehicle here and I hate buming rides. It seems like if a company is going to advertise a service they should atleast make sure they can provide it. Every time I click on a bill pay link the system kicks me back out to the login page. Its been doing this to me about two weeks now. Customer service is taking their time resolving this issue and it seems as if they are giving me the run around. Has anyone else experienced problems will the bill pay service?
Btw, the card is EDIC insured. The max amount you can place on the card is $5,000.00. The most I've ever had on it was about $4,500.00. The only fees I've ran into are atm fees and foreign transaction fees (less than a dollar). Any company will charge money for services provided, this is not a new concept people. Overall its a great program if you know exactly what you are getting into.
7-09-2010 @ 3:51AM
iwon said...
Between so much of varieties of credit cards, one of the most underestimated when accepting credit card for business is the value of the credit card. Many people do not choose to request a credit card of businesses because except having a definite target for the owners of businesses or the businesses director it seems to be complicated to employ. Although a credit card of businesses has more conditions and has more raised interests compared with other types of credit cards there is, contrary to the common design, it can very useful if be used correctly.
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