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AmEx Adds Cash Back to Prepaid Debit Card in Bid for New Customers

American Express is adding cash back, a popular credit card feature, to its prepaid debit cards as it seeks users beyond its traditional customers.

Image: American Express and American Express corporate cards are pictured in Encinitas ::  |
American Express and American Express corporate cards are pictured in Encinitas, California in this file photo taken October 17, 2011. MIKE BLAKE / Reuters file
American Express and American Express corporate cards are pictured in Encinitas, California in this file photo taken October 17, 2011. MIKE BLAKE / Reuters file

NEW YORK -- American Express is adding cash back, a popular credit card feature, to its prepaid debit cards as it seeks users beyond its traditional customers.

The company has long relied on the corporate traveler and the well-to-do, but increased competition has forced it to look for new customers. Prepaid cards, which appeal to lower-income Americans and people who don't have traditional bank accounts, are a small but growing business.

CEO Kenneth Chernault has said American Express would spend heavily this year to create new products and keep its existing customer base.

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On Wednesday, AmEx was releasing a new Serve card that will give users 1 percent cash back on all purchases. It's the first time a prepaid debit card has offered cash back for every buy. Some prepaid cards currently offer cash back at certain retailers.

The monthly fee will be $5.95, so you have to spend roughly $600 a month to break even.

AmEx entered the prepaid debit card market three years ago with a co-branded card with Wal-Mart called BlueBird. It launched Serve cards in 2013 aimed at consumers looking for a cheap alternative to a bank account. They have a monthly fee of $1, among the lowest in the industry.

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Prepaid debit cards have become a product of interest for banks and regulators alike in recent years. Originally a product with high fees and limited uses, they have in many ways become bank account replacements.

Other recent card tweaks: Another new Serve prepaid card, announced earlier this month, that allows unlimited reloads. It's aimed at workers paid more often in cash, like waiters or bartenders, and has a monthly fee of $4.95. Cash reloads on the current Serve card were $3.95 each, so the new card's monthly cost could be significantly cheaper for certain customers.

AmEx Serve customers have loaded $7 billion on their cards since launch and year-over-year spending tripled, said Stefan Happ, AmEx's chief commercial officer of enterprise growth.

Still, Serve and BlueBird don't have a significant impact on the company's profitability, he said.

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