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Challenge to the Tandem Money Card

Adam Rust's picture

Posted July 17, 2012

I think it is a mistake to view the Tandem Money card as an "all-good" or "all-bad" proposition.

Last week I wrote an extensive entry about Tandem Money. At the moment, that entry is the first non-paid reference to the card on Google.

My take was that the card is very significant for the ongoing evolution of the prepaid industry because it introduces a new iteration of the issuer function. The Tandem Money Insight MasterCard is the product of two different banks: Urban Trust Bank and Premier Bank. The former bank issues the "spend" side while the latter hosts the line of credit and the savings account.

The problem with that arrangement is that it creates a card with a line of credit which can arguably be the legal landing place for a direct deposit of a federal benefits payment. CEO Sorbe says that its effectively akin to a scenario where a consumer puts a direct deposit on to their Wells Fargo account and then arranges for an ACH from the Wells account over to a US Bank account held in his or her name.

This arrangement probably complies with the Electronic Funds Transfer Act - even if it probably contradicts the intentions of the EFTA.The EFTA says that there can be no automatic repayment of an advance or loan made to an account that receives a federal benefit. Although I am not a lawyer, I believe that the situation described in the prior paragraph comports with that standard. Secondly, the account's rules allow a person to repay from another source if they opt to make a manual repayment. If that is done, there is a fifty dollar fee.

There is another side to the story

If you are concerned about the EFTA situation, you will be challenged to feel the same way about the card itself. This is because there are a number of very good things about Tandem Money.

For one, it does have a savings account that pays interest which at this moment in time is paying one percent interest. Granted that is less than the amount paid by other cards, but it is still higher than the 0.10 percent that most people - including myself - are getting with a big bank savings account.

Even better is the fact that the card requires an automatic contribution to savings. We know that more accounts should make it hard for consumers to not save. Incenting them to do so or making it a standard account feature are both ways to get that done. As much as that seems like a no-brainer, there are few if any prepaid cards out there that are doing this right now. Tandem Money is innovative on several fronts.

It is also great that Tandem Money is reporting to the credit bureaus. No one has yet found an effective way to improve credit with a prepaid card. Tandem Money is not only reporting, but they are doing so to the Big Three. Past iterations reported, but not to a bureau of any import.

Last, the card does not have overdraft. Given that the spend side is attached to an Urban Trust Insight MasterCard, this is reassuring. There are more than a few prepaid cards issued by Urban Trust that come with overdraft.