Amex Bluebird is Out: Why You Should Possibly Stay in the Nest

If you read other miles and points blogs, you almost certainly have read something about the American Express Bluebird product that came out within the last week. However, if you haven't seen those others posts (or skipped them because you had no clue what they were talking about), I'll cover a few basics on why miles and points junkies care about this prepaid/reloadable Amex product, and I'll point out why you may want to "stay in the nest" for a while instead of diving right into this card's potential.

What is the Amex Bluebird?

The Amex Bluebird is a brand new prepaid product. Prepaid cards are neither credit nor debit cards, but instead are prepaid cards that have the money loaded on them up-front and then they are spent down and/or added to in the future. There are many prepaid cards out there, but people are touting the Bluebird as a "game changer" since it has many fewer fees and more potential uses than other prepaid cards on the market. The Bluebird is a joint offering with Walmart, and a starter pack can be purchased in Walmart for $5, or it can be ordered online for free. You can also reload the Bluebird at Walmart using cash or a debit card for no fee. When going into my local Walmart, it was impossible to miss the Bluebird stand since it is directly in your path upon entering the store.

The Bluebird is intended to be a competitor of check cashing services and it hopes to lure customers who are currently dealing with many fees from their checking accounts. It is trying to position itself to somewhat replace the need for a checking account for some customers.

Why are you writing about a prepaid card that doesn't earn miles or points?

Very good question. The reason this card is a hot item in the miles and points world is because the way you load money on the card can earn you miles and points. Additionally, you can then "spend" the money off of the card in ways that you can't do so with other rewards cards. So, while the card itself is miles and points neutral, it is a very good conduit for earning rewards via other cards.

Um, what does that mean? How can you load this card with money in a way that earns miles and points?

I am currently aware of two ways to earn points while loading money onto this card. First, you can use a debit card to load the card at a Walmart for no fee. There are a few mileage-earning debit cards out there. I currently don't have a mileage-earning debit card since my US Airways Bank of America debit card stopped working last month, and it is no longer offered.

Many Visa and MasterCard gift cards now also have the ability to be used with a pin number (as of 4/1/2013), so this can be a very good way to load a BlueBird at Walmart via their Money Center kiosk.

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The other way to load this card and earn miles and points is via a Vanilla reload pack purchased with a rewards earning credit card.

Okay, that makes sense, but isn't it too good to be true? Won't Chase, Amex, etc. shut you down for this?

It does seem too good to be true, but it has been working with other prepaid cards for many months in this manner. I am very new into the world of actual reloadable prepaid cards myself (I was purchasing the $500 one-time use gift cards previously), because I don't entirely trust it. I trust that it works, but I don't think we know how far the limits can be pushed quite yet. I am in this game now, but on a conservative level. I've decided that around $1,000 - $1,500 per month is where I feel comfortable.. I do make sure to mix up the amounts so not every transaction rings in at $505.

I also won't be shocked if one day we find that these prepaid/reloadable cards can no longer be purchased with a credit card. The Bluebird starter pack itself has to be purchased with cash or debit card, so it doesn't seem to be a huge stretch that one day the same will be true for the other reloadable type products. I very much hope I am wrong about that, but this may be a limited time rodeo.

I also think that since the Bluebird product is brand new, we don't know yet what type of activity is going to trigger red flags for Amex. Specifically, there are some new ways to "spend" the money off of that card, that I am afraid may get folks shut down. For that reason, while I did purchase my Bluebird starter pack this week, I am not going to go crazy with it at all for a while. I will more or less be "sitting in the nest" and learning from others while doing some diverse and smaller transactions with the card. Thumbs up for those who are the pioneers with this sort of thing (All Hail "King of the Prepaid" Frequent Miler), but my family is just too darn busy to mess with being the guinea pig and dealing with fraud alerts, warnings, shut downs, problems, etc. If your family falls into the same category as mine then move slowly, watch, listen, and learn.

You mention there are new ways to spend the money off of the Bluebird. What do you mean?

In addition to being able to use it for everyday purchases like you would a credit card, you can also use the money on a Bluebird card to pay bills online such as your mortgage, your car payment, your electric bill, etc. without a fee. This opens up a whole new world of opportunities since traditionally those sorts of payments have been impossible to earn points on without paying a fee, and going through a third party online service. I have heard mention of some folks paying a credit card bill with this card...you may see where that is headed, and I would say tread very lightly. I will be sitting in the nest and watching how that one plays out, as it seems very risky in my book if you get a loop going there. You can also pull money out via an ATM. This isn't unique to the Bluebird, but it can be a handy feature. There are fees for this if you don't have a direct deposit set-up.

You can also transfer money from your Bluebird account to your checking or savings account. Again, this sounds like a "tread lightly" situation to me. There are lots of additional ways to spend this money as well, I recommend cruising around the Bluebird website for all the nitty gritty.

How much money can I load on a Bluebird?

There is a $1,000 daily limit and a $5,000 monthly limit for loading the Bluebird via a debit card at Walmart. There is also a $1,000 daily and $5,000 monthly limit using a Vanilla reload. A maximum of $10,000 can be on the Bluebird at any one time. You can see all the other various limits on the Bluebird site. I had a problem with a "fraud hold" when I first loaded money on my Amex prepaid (not a Bluebird), and the solution was just to be patient for 24 hours and it resolved.

What if I lose the card? Does it have fraud protection?

Yes, but only if it is registered. If it isn't registered than you are out any money that is spent off the card before you notified Amex. I have exchanged emails with a reader who is having all sorts of drama dealing with some fraudulent charges on an Amex prepaid, but I am pretty sure it is not on the Bluebird. I don't know if the process is substantially different with the prepaid he has and the Bluebird, but I just wanted to mention that tidbit.

Does it have purchase protection?

Yes, it seems to cover items purchased with the card for 90 days if they are broken or stolen. More details can be found on the Bluebird website.

Are deposits FDIC insured?

It wasn't at first - but this was introduced in March 2013.

Okay, so this sounds potentially very lucrative, but I'm not sure if it is worth it or not. What should I do next?

Like I mentioned, don't feel the need to plunge out of the figurative nest head-first into the world of Bluebirds and prepaids. The Bluebird product is brand new, and if you want to just patiently watch and learn from others, then do that. You will probably save yourself some drama and frustration by learning from others' mistakes before making your own. I will post some on the topic, but Million Mile Secrets, Gary Leff, and the King of Prepaids, Frequent Miler, also seem to be quite interested in Bluebird. I recommend keeping an eye on them, and especially Frequent Miler for Bluebird updates and experiments.

I do not think that this opportunity will be around forever. I do think that being conservative and cautious is better than going crazy with this. I do think that at least putting your toes in the gift card/prepaid world is a good thing.

If you want, you can order a Bluebird for free online today (probably a better plan than paying to get a starter pack at Walmart). If you do pay $5 and pick up a starter pack at your neighborhood Walmart you will get some high quality people-watching for free with your purchase. You then have to register the one you get at Walmart online to get your "permanent" Bluebird.

I'm sure this doesn't answer every question about the Bluebird, but it isn't supposed to. My hope is this info just helps open a few eyes a little bit, as well as encourages some restraint and patience with this new world of miles and points opportunities. If you get the Bluebird, just try to make your spending patterns look as much like a normal person as possible to avoid raising suspicion. Normal people have purchases of various sizes at various places. Normally people have online bill pays to various payees for various amounts. Normal people wouldn't pull money off the card to their checking accounts or similar as soon as they put it on. Normal people wouldn't be pulling large amounts out of the ATM every day. You get the idea. I'm not going to go crazy with this, and I encourage others who don't want to deal with potential headaches to do the same.