Solid Reasons for the Unbanked to Shun Chase's New 'Liquid Card'

Liquid cardWhen bankers come up with a new wonder product, it's rarely good news for consumers. JPMorgan Chase's (JPM) new "Liquid" card is no exception.

Unveiled last week, Liquid is touted as "a reloadable card that offers customers financial control and flexibility with the convenience of Chase's extensive branch and ATM network." Co-branded with Visa (V), Liquid can be used much like a credit or debit card to withdraw cash from ATMs, pay for purchases in stores and online, and even pay the electric bill.
It offers other conveniences, too. For example, you don't need to have a bank account with Chase to use the card. Plus, Liquid can be "charged" with as little as $25 initially.

These two benefits work hand in hand to benefit customers who might not have enough money saved up to open a fee-free bank account. So for the estimated 17 million "unbanked" Americans, Liquid offers a viable alternative to traditional banking. (And an introduction to Chase, which presumably hopes customers will keep on banking with them once their financial situation improves.)

But Liquid's not without its flaws. Indeed, one flaw in particular threatens to make saving up enough to open a traditional bank account harder, not easier.

Why is it bad?

Earlier this year, as you may recall, Chase was among several banks that tried to push through a $3 monthly fee for using its debit cards. Customer backlash put a quick end to that plan, but now it's back with a vengeance.

Liquid -- itself essentially a debit card for people who don't have a bank account -- comes with a $4.95 monthly fee. That's 65% more than what Chase had hoped to squeeze out of ordinary cardholders.

Let's do the math -- $4.95 a month comes to $59.40 a year. That might not sound like much, but remember: This is a fee Chase is charging, basically for the privilege of letting the bank hold on to your money and lend it to other customers.



According to personal finance site getrichslowly.org, $60 is enough money to feed a small, frugal household for a week. Instead, the bank is taking this money for itself, as the price of accessing your own money.

Sure, on the plus side, Chase says it won't charge more fees to make cash withdrawals at Chase ATMs, or to add cash to your Liquid card, for example. In a fit of unfettered generosity, Chase adds that customers will incur no fee "to check their balances." (No fee to get back your own money, or find out how much of it you've got left? Gee, thanks!) To top it all off, according to the bank's press release, "Chase Liquid's affordability and transparency will set a new industry standard for prepaid products."

Let's hope not.

Follow the Money

So why is Chase pushing this lemon so hard? Basically, it's out of necessity.

Ever since the financial crisis hit, Congress has been putting the screws to the banking industry, passing laws to cap interest rates on credit card debt and ban the concept of "universal default," requiring overdraft protection to be an opt-in process, slashing the fees banks can charge merchants on debit card transactions -- and dozens and dozens of rules more.

One effect of all this regulation, naturally, has been to deprive banks of multiple sources of revenue they'd come to rely upon. Another effect -- just as natural -- has been to make bankers scramble to find new sources of revenues. Because any bank that fails to do so, that fails to "grow" earnings every year, or even -- horrors! -- posts an earnings decline, is going to get absolutely whacked by the stock market come earnings season.

At the risk of sounding harsh, though: That's their problem. Not yours.

Just because banks need to find new sources of revenue doesn't mean you have to play the patsy and be that source. Next time Chase comes calling, hawking its Liquid prepaid card, tell 'em no thanks. This Liquid idea just doesn't hold water.

Motley Fool contributor Rich Smith holds no position in any company mentioned. A diligent collector of points, miles, and cash back on credit cards, he's never seen the point in using rewards-less debit cards -- and sees even less logic in Liquid. The Motley Fool owns shares of JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Visa.

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18 Comments

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Bob Koopman

I just received mine. On a Smith's pre-paid card I was paying $3/month PLUS $3 everytime I wanted to load it...equals $72/year if I loaded it just 1 time per month. On Greendot...$4.95/month AND $4.95 everytime to load....equals almost $120/year if I just loaded it just 1 time per month. This Chase Liquid is a MUCH better deal and FREE unlimited loads.

October 09 2012 at 3:56 PM Report abuse rate up rate down Reply
YR

Be wary of this card. Chase claims that no credit checks will be necessary, however, I signed up for the card a few weeks ago, have been using it regularly, reloaded it at branch locations, and recently I received a letter from Chase indicating that they would be closing my account for undisclosed reasons. I am considering whether or not to sue them for fraud, false advertising, and breach of contract. Anyone else been treated in this manner?

September 09 2012 at 8:52 AM Report abuse rate up rate down Reply
1 reply to YR's comment
srrnycspencer

Same thing happened to me. But I don't think a law suit is possible unless reliance and fraud is alleged and I'm not sure that those two elements are present in this instance. I am willing to try though.

November 24 2012 at 5:38 PM Report abuse rate up rate down Reply
Joseph Casado

After hearing about the new Liquid card I went in to the bank to open up one because i thought this was a good way to possibly save money for my vacations next year, as you may know they advertise it as a prepaid card, this is absolutely NOT the case, Chase requires the same qualifications as if you were opening up a regular checking account, which i already have, not happy with it but still have . Hmm isn't this false advertising ? when i called them to ask why they were processing my information as if i was opening up an account , they told me, that i am still opening up an account with them ,I explained to them this is a prepaid card and should not be processed like if i was opening up a regular checking accounting, their answer was " well you still are opening up an account with Chase" my answer was to them , NO Thanks, since you already falsely advertise the card to consumers i can only imagine what will come next, it seems like they are just setting the customer up to eventually end up paying more fees later on down the line. I am saying once again NO the the BIG BANKS. besides aren't they the ones that got us into this mess anyways ...

August 20 2012 at 1:41 PM Report abuse rate up rate down Reply
jimshanahan

A Motley Fool reporter wrote this piece of garbage?

1."a fee Chase is charging, basically for the privilege of letting the bank hold on to your money and lend it to other customers". Obviously Mr. Smith never had to wait in line to cash and pay $20 to cash his weekly paycheck, or got mugged after getting his cash, or couldn't buy something on the internet because he had no card, or could rent a car, or stay in a hotel or buy something on the internet because he had no card. Its called giving 60 million un and underbanked the same convenience and safety that other card carrying american have enjoyed for years.

2. "Sixty dollars a year too high a fee and can be used to feed a family of for a week"??? My guess is that Mr. Smith drops that much at a happy hour for a couple artisan cocktails. But the point is that people unlike Smith who do not have thousands of dollars to lie idle in DDA that pays 0.10% have to PAY for checking accounts, pay as much as $12 a month for their checking account and easily over the $5 that Chase charges for Liquid.

3. "When bankers come up with a new wonder product, it's rarely good news for consumers." oh yeah? What about ATMs, would you rather go to a teller to get some cash? WHat about credit cards? Would you rather bring a suitcase full of cash on vacation? what about internet banking ? the list gives on and on.

Rick my boy, I suggest you quit your day job and go help the OWS folks. You obviously have the temperament and same willingness to put your own opinion over the facts.

Sincerely,

Jim Shanahan

June 22 2012 at 1:55 PM Report abuse rate up rate down Reply
1 reply to jimshanahan's comment
eraserhead12

Seriously, this guy is b*tching about paying $60 a year for a reloadable pre-paid card, which grants access to Chase ATMs and has no other hidden fees. for someone who is unbanked, I fail to see how a paltry $5/month is such a terrible loss.

Heck, for a meager $60 you can't even feed a family at a low-end restaurant for one DAY; surely a year's access to a bank is worth more than a night at some cheesy theme restaurant with the kids.

I already bank with Chase, I get this card for free. For websites that don't use Paypal, I use this card to protect my actual debit card.

April 22 2013 at 4:32 PM Report abuse rate up rate down Reply
Gianni

Dear Writer of this article:

"Chase adds that customers will incur no fee "to check their balances." (No fee to get back your own money, or find out how much of it you've got left? Gee, thanks!)"

Are you stupid? It's actually not your own money ... literally, it is the banks money, in the ATM, and they are allowing you to access it and withdraw it any one of their thousands of ATMs that are conveniently located for you.

Let me put this another way if you still don't get it: If you went to the "soda bank" and deposited "100" Diet Cokes into your account there, and you went to a "soda machine" 3000 miles away from the "soda bank" where you actually PHYSICALLY deposited your Diet Cokes, you don't think it's okay to charge a convenience fee, to have it right then and there for you? Much better, the soda that is in that particular "soda machine" is NOT yours, yours is 3000 miles away in a far away place. Somebody had to pay money for the working capital required (inventory of soda's,) storage, delivery, electricity, the cost of the machine itself, data and processing lines, and also insurance to mitigate theft and other risks.

So please, don't give me this bullshit, that its "your money" in the atm, it is NOT your money. It's somebody Else's Money, and it costs money to have it there for your access.

Don't like it? Cash every paycheck you get, carry around wads of cash, hope you don't get robbed, and or put the cash in your mattress. But when you're 3000 miles away from your mattress or even 10 miles away from it, don't complain ...

Does this make sense to you now?

--Owner of 190 ATM Machines ... My ATMs Are basically vending machines that dispense Cash instead of Sodas or Candy ... and its MY money you're withdrawing ... and yes I get paid back the next day, but its technically NOT yours.

June 08 2012 at 9:03 PM Report abuse rate up rate down Reply
1 reply to Gianni's comment
rawrainwater

It "is" our money, technically

You're just saying that because you own 190 atms.

Yes, maybe it costs to make that money available everywhere. But, it doesn't cost all of our money, I think. It costs the normal fees.

And banks can find ways to make money that don't include charging us for depositing, if they want.

I do have a chase liquid card and I do like it, though.

How are you saying that money we deposited in a bank is not technically ours?

How would you feel if you deposited all of your atm money and someone said it was theirs. You have to use banks too.

Sorry. I disagree with you.

September 16 2013 at 2:45 AM Report abuse rate up rate down Reply
Jah-Roam Milliscone

It always amazes me when companies think they can grow forever.

May 17 2012 at 10:25 AM Report abuse rate up rate down Reply
GymmyKramir

and soon u all will be able 2 enjoy all 5 of Gymmy's trip report

AT ONCE

Next Up is Morris Cantonitis and the latest TIP on how the NYC PIGGS TAKE U 2day and EVERY day

May 17 2012 at 9:27 AM Report abuse rate up rate down Reply
GymmyKramir

Boogawagarama
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Signs waving everywhere across China. NYC financial demon 2 b wed aNd there R parties Everywhere. China sez they r in the NYC financial PIGGS bridal party and bring many gifts.
I see this bystander.
Hey, Whatz up?
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Boogawagarama
Alright and mooooooooooving a long
4 All the ladies out there:
Here is the moment u have been waiting 4.
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“Chung where R u frum?”
I am homegrown frum Heatemydog.
Boogawagrama
Ok , so whatz new longtung?
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Boogawagarama
Well, It is with a tear in Gymmy’s i, 2 sadly say this will EnD tHe wErLd tour and thanks again 4 joining us – it’s been r pleasure. But what a great way 2 END. 2night it’s Daarck Knight, Chunglongtung, and me Gymmy Kramir together 4 an evening. And I’m a monkeys believer now when Daarck sez; “The Midnight is Daarck Knight. There is NO STREET light”.
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as they say here in Heatemydog, cHiNa.
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As I RIDE on the Chinese Gatling Accupuncture Float in the NYC wEdDinG paRaDE and the NYC financial PIGG float sinks frum treatment, I’ll check out the next update of headline newz TV in Heatemydog, China with the views frum the NYC Ferry.
Now, it’s time 4 us 2 RIDE and RIDE and RIDE

Until the chinese sun rises above the NYC Daarckness

May 17 2012 at 9:23 AM Report abuse rate up rate down Reply
Andrew P

@Rich Smith - the tone of your article smacks of the typical "all banks are evil". Even with this nominal fee for an stored card, it easily beats fees the unbanked pay to currency exchanges and pay day lenders every day. Think about the current options for the unbanked before spouting off about fees on this type of card. Given the transaction risk associated with even debit cards and this segment, I'm surprised the fee isn't higher.

May 16 2012 at 8:53 PM Report abuse rate up rate down Reply
Kellylynn Trammel

I disagree with this article, although it is well written. This is the first prepaid credit card I have heard of that doesn't charge multiple fees. All of the ones I have researched have balance inquiry, withdrawl, loading and user fees. Plus most of them don't report to the credit bureaus. So, if Chase is only charging $5 p/month....more power to them.

May 16 2012 at 6:38 PM Report abuse rate up rate down Reply
1 reply to Kellylynn Trammel's comment
Jah-Roam Milliscone

There are other cards that don't charge anything if you put in so much a month and even those charge less than this

May 17 2012 at 10:26 AM Report abuse rate up rate down Reply
1 reply to Jah-Roam Milliscone's comment
eraserhead12

.. really? where are these reloadable pre-paid card for unbanked individuals, which offer free access to ATMs, and cost less than $60 including all related fees?

April 22 2013 at 4:27 PM Report abuse +1 rate up rate down