Wal-Mart's boon for 'unbanked'

THE SAVAGE TRUTH | Money Centers offer opportunity for many, but watch fees

Wal-Mart's entry into the consumer banking wars is not only a great opportunity for many people who avoid banks because they live from paycheck to paycheck. It's also a shot at the consumer banking industry, which has been raking in record profits.

And the 1,000 Wal-Mart MoneyCenters that the retailer plans to open by the end of 2008 should decimate the business of those corner check-cashing stores that charge exorbitant prices for their services.

The new MoneyCenters will be designed to attract those customers, many of whom are considered "unbanked." These centers within the Wal-Mart stores will be open seven days a week, from 7 a.m. to 9 p.m., to provide access to low-cost money services, including check cashing, money orders, bill payment and money transfers. Wal-Mart says its customers visit its stores, on average, 2.5 times per week.

A key feature of Wal-Mart's push to reach this market is the launch of a national campaign to promote the Wal-Mart MoneyCard -- a reloadable prepaid Visa card that Wal-Mart is launching in conjunction with GE Money and the Green Dot network.

These new centers and the MoneyCard do not require a banking charter (which Wal-Mart tried in vain to secure), since they use a partnership arrangement with GE Money Bank and the GreenDot ATM network.

The MoneyCard can be loaded in Wal-Mart stores by depositing cash or by depositing a paycheck or government check. It can also be reloaded at any GreenDot network location. The card can be used as a traditional debit card, to pay for gas at the pump, to pay bills online, or to receive cash without paying a fee at the checkout counter.

The cost is a one-time $8.94 -- a strange number, typical of Wal-Mart pricing. But, if you're not careful you could wind up paying other significant fees.

For instance, there's a monthly fee of $4.94, which you can avoid by loading at least $1,000 onto the card during a one-month period. (Two users can share a card, each making deposits to avoid this fee.)

Then there's a reloading fee of $4.64, which you can avoid if you have direct-deposit of your payroll check, or if you cash a payroll or government check in a Wal-Mart store and use part of the proceeds to reload your card.

There will be no overdraft fees, since the credit line is the amount of the customer's deposit. There is no credit check required to get the card because no credit is being extended. But there are ATM withdrawal fees of $1.95, which you can avoid by getting up to $100 cash over your purchase at the Wal-Mart cash register.

You can check your balance for free by asking the cashier in a Wal-Mart store, or by using an automated telephone service, or online, using your pin. Or Wal-Mart will text-message or e-mail your balance to you daily.

Jane Thompson, president of Wal-Mart Financial Services, says the new Wal-Mart MoneyCenters and MoneyCard will capitalize on the trust that both the Wal-Mart and Visa brands have created in the consumer's mind. Thompson hinted at more financial products to come by year-end.

There are currently 225 Wal-Mart MoneyCenters in stores as part of a pilot program, and that number will increase rapidly to more than 1,000 stores by year-end 2008. The new Wal-Mart MoneyCards have already been shipped and will be available by the end of June at more than 1,300 stores, double that number by the end of July -- and at almost all stores by the end of the year.

Some may scoff at the idea of "banking" at Wal-Mart. We've come a long way since the days that Sears tried to have its Dean Witter subsidiary sell stocks across the aisle from socks. The time has come for lower-cost, accessible banking services. Yes, they're in it to make money, but Wal-Mart is, once again, bringing down prices to the benefit of consumers.

And that's The Savage Truth!

Terry Savage is a registered investment adviser. Check out Terry's answers to reader questions at suntimes.com, and click on Business. Distributed by Creators Syndicate.