Posted by: John S Kiernan

Rating: 5 / 5

The Verdict:  This is neither your parents’ checking account nor a credit card.  Rather, American Express Serve® is simply one of the best prepaid cards on the market right now.

As relative newcomers to mainstream personal finance, prepaid cards are confusing and unfamiliar to many. It helps to think of them as checking accounts without the physical checkbook. They don’t help you build credit, but they can simplify and reduce the cost of everyday banking.  Serve is a perfect example of prepaid cards’ money-saving potential, offering free in-network ATM withdrawals, free online bill pay and free mobile check cashing. The card has a $6.95 monthly membership fee (that won’t be charged in New York, Texas or Vermont), and it is waived if you receive a direct deposit of $500 each month.

That’s why WalletHub named Serve “Best Alternative Checking Account,” “Best Alternative Check Cashing Tool” and “Best For Access to Electronic Transactions” in our Prepaid Cards Report.

The Highlights

• Free Withdrawals At 24,000+ ATMs: As an American Express Serve® cardholder, you will have free access to the MoneyPass ATM network, which has more than 24,000 locations across the U.S.  As long as withdrawing money only from these ATMs would be convenient enough for you – find out using the MoneyPass ATM locator – this is a great deal.

• Free Online Bill Pay: Many prepaid cards make it logistically impossible to pay monthly billers who do not accept plastic, which is one of the biggest impediments preventing them from truly supplanting traditional checking accounts. After all, prepaid card users who do not have access to a free online bill pay feature must either keep a traditional bank account open just for check-writing purposes or use an expensive third-party service such as Plastiq that accepts card payments and cuts checks to billers on your behalf.

  But Serve requires no such tradeoffs. You can pay any recurring bill for free using your Serve account, whether your biller requires a paper check or card payment.

• No Monthly Fee With Direct Deposit Of $500+: This is an easy requirement to meet if you set up direct deposit for your paycheck or government benefits. But even if you can’t, the downside is negligible, considering that Serve’s standard charge is $6.95 per month. 

• Cash Checks For Free With Serve’s Mobile App: Cashing checks is another example of a potential hang-up preventing people from pulling the plug on their checking account.  Check-cashing fees are also the bane of the unbanked’s existence. Serve solves both problems by allowing users to deposit checks for free using its mobile app. All you need to do is open the app on your smartphone and take a picture of the check. The funds will generally be available for your use within six business days.  That’s better than having to trek down to a bank branch or giving a hefty chunk of your pay to a check-cashing service, provided that you can afford to wait for your account to be credited. 

• Free Sub-Accounts: You can set up as many as four free sub-accounts for your American Express Serve® Card in the names of any individuals who are at least 13 years old.  This makes it easier to give your child an allowance, in many cases, or make regular payments to a service provider whom you would normally pay with cash.

The Lowlights

• $2.50 Out-Of-Network ATM Fee: If you’re the type of person who doesn’t typically plan ahead when it comes to accessing cash — preferring instead to withdraw money as needed from the closest ATM — this card could present some problems.  Each time you make a withdrawal from a non-MoneyPass ATM, you’ll get hit with a $2.50 fee, and that can add up fast.  Before signing up for a Serve Card, make sure a MoneyPass ATM is close to your home, office or gym, for example, and be honest with yourself about your withdrawal habits.

  Keep in mind that this problem isn’t unique to Serve. All prepaid cards charge ATM fees of some sort), and many don’t even offer a network of free locations. There are, however, some checking accounts that refund all debit card fees, but these tend to be high-yield or premium accounts that require high minimum daily balances.

• Pricey Cash Reloads: If you wish to load cash directly onto your Serve Prepaid Card, it’s going to cost you – up to $3.95 each time, depending on where you make the transaction (Walmart, CVS, 7-11 and Family Dollar are all options). This could make Serve prohibitively expensive for people who get paid in cash, at least compared to prepaid cards issued by banks with a strong brick-and-mortar presence, which tend to allow free cash deposits.

• Only Good For Allowances If A Parent Is The Primary User: Primary accountholders must be at least 18 years old (19 in some states), which means you can’t simply open an account in your child’s name as a means of providing an allowance via bank transfer or a similar funding mechanism.  Although you can open your own account and then establish a sub-account for your child, you must still make a direct deposit of at least $500 each month in order to avoid fees.  That means the Serve Card is only a good option for teaching your child the Ps and Qs of personal finance if you plan to make full use of the account yourself.

• “Early” Direct Deposit Is Misleading: There’s nothing special about Serve’s direct deposit feature. It won’t get you paid “early” or “two days faster” relative to any other prepaid card or checking account that offers direct deposit.  Direct deposit itself is what speeds things up compared to receiving a paper check, depositing it by hand and then waiting for it clear.

  To be fair, American Express isn’t the only prepaid card issuer to make use of this misleading marketing language, which draws a comparison between electronic and offline deposit methods that is basically akin to contrasting e- and snail mail.  Other major players like Account Now and NetSpend do the same thing.  But the practice does a disservice to consumers, no matter who’s driving the propagation, because it serves as sleight of hand distracting interested applicants from the material differences that actually do exist between the prepaid cards, traditional bank accounts and other financial tools from which they are attempting to choose.

Other Things To Consider

• FDIC Insurance: Funds held in a prepaid card account aren’t always as safe as those deposited into a savings or checking account. That’s because prepaid cards are not required to be insured against bank failure.  But Serve provides peace of mind, as account funds are FDIC-insured up to the same $250,000 per-depositor limit that applies to traditional bank accounts. 

• Amex Member Benefits: Serve cardholders benefit from many of the same complimentary user protections and perks as American Express credit card users, such as roadside assistance and a purchase protection policy that covers certain goods against damage or theft for 90 days after you buy them. 

• Free Live Customer Support: Believe it or not, a lot of prepaid cards charge a fee each time you want to talk to a live human being about your account.  Fortunately, American Express Serve® is not among them, because paying for customer service that most people probably think should be free is a pretty tough sell for many consumers, especially in the context of a relatively unfamiliar type of product. 

• No “Inactivity” Or “Cancellation” Fees: The average checking account charges 30 different fees and the average prepaid card charges nine. But the American Express Serve® Card is far from average. It has only two potential fees, and neither results from account inactivity or cancellation. This is an important example of the fact that American Express Serve® won’t nickel-and-dime you, in direct contrast with many other offers that necessitate a thorough reading of the terms and conditions before both beginning and curtailing use. 

• Price Discrepancy Between Online & Retail: It’s better to order your Serve Card online than to purchase one in-store from a retailer.  The former is free, while the latter costs up to $3.95 and will require you to nevertheless register your account online and then wait for a permanent card to arrive in the mail. 

• 2.7% Foreign Transaction Fee: Not only is Amex less widely accepted internationally than Visa and Mastercard, but the Serve Card also assesses a 2.7% foreign surcharge on transactions processed outside of the U.S.  That means cardholders cannot really depend on Serve when traveling abroad or making purchases through internationally based merchants.

  The best recipe for such spending is the combination of a no foreign transaction fee credit card for purchases and a no foreign transaction fee debit card for international withdrawals – both on either the Visa or Mastercard network for the best conversion rates. 

• Free Cash Deposits & 1% Cash Back: American Express recently added two new variations of the Serve Card, one allowing you to load cash to your card for free at a network of retailers and the other providing 1% cash back on purchases.

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