The heat is on for prepaid debit card marketers to match one another on certain key services and features as competition between providers escalates.
Cincinnati-based Kroger Co. announced this week the availability of free ATM withdrawals through the MoneyPass ATM network with the reloadable prepaid debit cards it sells in conjunction with U.S. Bank.
Previously Kroger charged consumers $2 for each ATM withdrawal outside of its stores. Kroger, which launched its prepaid card in 2010, sells the product through 2,500 stores nationwide.
Extending broad ATM access to Kroger prepaid cardholders should be relatively painless for U.S. Bank. The Minneapolis-based bank has branches inside 192 Kroger supermarkets, and also owns Elan Financial Services, which operates MoneyPass and its estimated 23,000 ATMs nationwide.
Kroger is under pressure from large retailers to keep its prepaid cards competitive.
Kmart on July 17 launched a reloadable prepaid debit card backed by Green Dot Corp. that it offers with free ATM access through the MoneyPass network.
Wal-Mart Stores Inc.'s MoneyCard prepaid Visa debit card also provides free ATM access through MoneyPass.
As more prepaid card providers expand free ATM access and offer more deals to waive card fees, the competition to retain customers is ratcheting up, Madeline Aufseeser, a senior analyst with Aite Group, says.
"The prepaid card market is steadily getting more competitive and we're going to see more examples of providers matching one another's ATM access and other features," Aufseeser said in an interview.
But even with free ATM access, Kroger's prepaid card still has "relatively steep" fees, she notes.
Kroger's prepaid card costs $3, and the monthly maintenance fee is $3. Each cash reload costs $3, while direct deposit is free. Kroger touts its free, live telephone customer service and five free balance-inquiry texts per customer per month, but provides no options to waive monthly fees.
One feature that sets Kroger's prepaid card apart is a rewards program promising customers $5 in free grocery coupons for every 1,000 points they accumulate using the card. Prepaid cardholders may earn 3 points for every dollar spent on Kroger private-label brands inside its stores, 2 points for other store purchases and 1 point for purchases made elsewhere.
Such rewards programs may become more common as prepaid card marketers try to differentiate their offerings, Aufseeser says.
"As competition increases in prepaid cards, there's growing pressure for card program operators to do anything they can to retain cardholders in order to maintain profitability," she says.