American Express is adding new features to its Bluebird prepaid card to make it more competitive with checking accounts.

The Bluebird prepaid card, which Amex sells through Walmart stores, now has a checkbook and FDIC insurance, allowing for balances of up to $100,000. Previously, a customer could keep only $10,000 in an account at any one time.

"Our stated intent was to create a checking and debit alternative for those that are unhappy with the more traditional ways of delivering these things," says Daniel Eckert, Walmart U.S.'s vice president of financial services, in an interview.

The two companies launched Bluebird on top of Amex's digital wallet platform, Serve, in October after rumors surfaced over the summer that a pilot of the program born in late 2011 had been scuttled. Three months later, in January, there were 575,000 Bluebird customers, says Dan Schulman, Amex's group president of enterprise growth.

Perhaps the most significant development is that Bluebird accounts can now accept government payments, such as social security checks and tax refunds. An early criticism of the accounts was that Bluebird was not federally guaranteed.

Amex is working with Wells Fargo, which will hold all the deposits, says Schulman, in order to provide the insurance.

To write a check, a Bluebird cardholder must get an eight-digit authorization code from the Bluebird smartphone app to write on her check. The amount allotted for that payment is then segregated from the total she has available. And the payee can instantly validate the check by calling an 800 number printed on the Bluebird check to determine whether or not the writer has the money available.

For the full story of how Bluebird takes aim at bank accounts, see Bank Technology News.

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