NEW YORK – (AP) – American Express on Tuesday launched its own checking account product, a product that will allow its customers to earn its popular Membership Rewards points the same way they do on its credit cards and payment.
It’s a notable move for AmEx and the banking industry in general, since checking accounts that offered airline miles or rewards all but disappeared after the passage of the Dodd-Frank Act in the wake of the Great Recession. Currently, only a handful of smaller banks and credit unions offer cash back or rewards for debit card purchases.
The AmEx current account will come with a debit card and an annual interest rate of 0.5%. The debit card will give account holders one membership reward point for every $2 they spend on purchases. These points can be bundled with Membership Reward points that the cardholder might already earn on a credit card.
“Our customers are happy with the benefits and rewards they get from our products, so we’ve been very interested in finding ways to have a broader relationship with our members,” said Eva Reda, executive vice president and general manager of consumer banking products at AmEx, in an interview.
The new checking account will currently only be available to current AmEx credit card holders, the company said.
It was common for major banks to offer checking accounts that offered cash back for rewards from debit card purchases. JPMorgan Chase had a debit card that gave Mileage Plus points on United Airlines in the early 2000s, for example.
This came to a screeching halt after the enactment of the Durbin Amendment, part of the Dodd-Frank Act passed in 2010 after the Great Recession. The Durbin Amendment capped the amount of money banks and payment processors could charge merchants for debit card transactions. It was a major victory for merchants at the time, who had long complained about the fees they paid for routine debit card purchases.
Banks, which were using the fees they earned on debit card purchases to partly fund rewards programs, quickly ended those programs.
American Express is not subject to the Durbin Amendment – it operates its own closed system where AmEx operates as both bank and payment processor. Discover Financial also offers checking account rewards and operates a “closed loop” system similar to AmEx.
AmEx has branched out into other consumer banking products over the years, with varying degrees of success. The company launched an online-only savings account more than a decade ago, which became popular for the high interest it would pay deposit holders. The company also offers prepaid debit cards as well as certificates of deposit.
The new debit card will work on the MoneyPass ATM network, the company said, to enable fee-free withdrawals at eligible ATMs. There will be no monthly maintenance fees. Accounts will also not allow a customer to have a negative account balance.
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