Last week InComm and Amex announced that InComm would acquire American Express’ Serve technology platform (which also includes Bluebird and REDbird) and would become the exclusive distributor of all Amex prepaid cards in the US. Bloomberg describes this as the end of Amex’s $300 Million prepaid tech experiment (Amex originally bought Serve technology for $300 Million).
I think it’s smart of Amex to give up their prepaid products. Amex’s brand has long been about great service for high net worth customers. Their prepaid products were exactly the opposite: terrible service for the unbanked.
But, for those of us who seek credit card rewards, Amex’s prepaid products have been great… until they weren’t. Does this technology and product migration from Amex to InComm mean changes are coming? Will they be good or bad for us? Let’s take a look back before looking forward…
Amex prepaid reloadable cards have long been a key ingredient towards the pursuit of miles & points. In 2012, I published “One card to rule them all.” I had found these things called “Vanilla Reload Cards” at Office Depot. I was able to buy them with a Chase Ink card in order to earn 5X rewards, and I was then able to load their value online onto an American Express prepaid reloadable card (no longer available). By using the Amex reloadable card to make everyday purchases and to withdraw cash from ATMs, this was a great way to indirectly earn 5X everywhere.
Bluebird and near perfect manufactured spend
Later that same year, Amex and Walmart introduced a new prepaid reloadable card: Bluebird (see: Bluebird takes flight and changes the game). On paper, Bluebird is a fantastic no-fee option for those without checking accounts. In practice, it has been hit or miss. Most of the “miss” has come from Amex’s terrible customer support for their reloadable prepaid products. But for those who simply wanted to earn credit card rewards, Bluebird was terrific.
Bluebird could be loaded with Vanilla Reload cards (just like the old Amex prepaid cards) or by debit gift card at Walmart. This gave us two easy options for “feeding” the bird. One was to buy Vanilla Reload cards at stores that sold them and allowed them to be bought by credit card. Another was to buy Visa or MasterCard gift cards with credit cards and use those as debit cards at Walmart to load Bluebird.
The biggest advantage of Bluebird over the old prepaid cards was that Amex made it easy to withdraw money from Bluebird. You could withdraw for free from Walmart ATMs. You could link your bank account and simply move the money from Bluebird to your account. Or you could use Bluebird’s free bill pay feature to pay anyone for any reason. One popular option was to use it to pay credit card bills. This made for a near perfect manufactured spend opportunity:
- Load Bluebird indirectly via credit card (either with Vanilla Reload cards or Visa/Mastercard gift cards)
- Pay credit card bill with Bluebird
There were small fees involved either for buying Vanilla Reload cards or for buying Visa/Mastercard gift cards, but as long as you used a credit card that earned rewards that exceeded the fees, you would come out ahead.
It wasn’t long after Bluebird’s launch that Office Depot stopped allowing customers to pay for Vanilla Reload cards with credit cards, but that was OK. We moved on to other stores that still allowed it (CVS, for example).
Bluebird was built on the same technology platform as an older Amex prepaid product called Serve. Serve initially didn’t have much going for it, but after Bluebird came out, Amex slowly added the best Bluebird features to Serve. Eventually Serve became better than Bluebird in almost all ways. The primary advantages were that it was possible to load $1,000 to $1,500 online with a credit card (and these loads earned rewards at the time), and it was possible to reload at more stores than just Walmart.
Vanilla Reload dies for many
For a couple of years, my primary method of manufacturing spend involved buying Vanilla Reload cards at CVS. That option came to a screeching halt in April 2014 when CVS stopped allowing Vanilla Reload cards to be bought with credit cards. Some people found local non-CVS stores that continued to allow credit card purchases of Vanilla Reload cards, but for most of us, this option was dead. Instead, we turned to buying Visa and Mastercard gift cards to reload Bluebird or Serve at Walmart.
The rise and fall of REDbird
In October 2014, Target quietly rolled out The Target Prepaid REDcard to select markets. This card was built on the same platform as Bluebird and Serve and shared most features. As a result, we dubbed it REDbird. The main difference was how the card was loaded. You couldn’t load it at Walmart, but you could load it at Target. More awesomely, you could load it at Target with a credit card and for free.
Suddenly, perfect fee-free manufactured spend was possible:
- Use credit card at Target to load REDbird for no fee
- Use REDbird’s bill pay feature to pay your credit card bill for no fee
The result was completely free and easy credit card rewards.
Seven months after REDbird’s introduction, Target stopped accepting credit cards for reloads. Then, 5 months after that, they stopped accepting debit cards. For miles and points purposes REDbird was dead (DEADbird).
After REDbird, many of us retreated back to Bluebird or Serve. That was fine and dandy until Amex decided that enough was enough. Amex identified accounts with “unusual usage patterns” (read: manufactured spend patterns) and froze them so that no more money could be loaded to them. Worse, once an individual had an account frozen, they found that they weren’t allowed to open other accounts (e.g. if your Bluebird account was frozen, you wouldn’t be able to open a Serve account).
Those of us who manufacture spend, continued to do so via other means. Many, many options have fallen away over the years, but a number remain and occasionally new options are born. We keep track of all of the major options (and changes to them) here: Manufactured Spending Complete Guide.
The sale of Amex prepaid products to Incomm interests me because it may lead to change, either good or bad. My crystal ball is in the shop, so I can’t say for sure what will happen, but I can make a few educated guesses:
- Guess 1: Customer support will remain awful.
- Guess 2: Incomm will slowly add fees over time
- Guess 3: Those of us who were frozen out of accounts before, will have another chance to sign-up (Chuck, at Doctor of Credit, guesses this too)
- Guess 4: Incomm will quickly shut down accounts of those who primarily manufacture spend
In short, I don’t have high hopes for the Bluebird/Serve future. At the moment, I believe Bluebird/Serve to be one of the best options for those who want checking account alternatives, but if Incomm adds many fees that equation will quickly change. For manufacturing spend, there may be a brief revival, but I doubt it will be worth the effort.
What do you think? Is the bird migration to Incomm a good or bad thing?
Last updated on March 31st, 2019