03/22/2012 11:02 am ET Updated Mar 26, 2012

American Express Prepaid Cards Dangle Possibility Of Actual Credit Card To Customers

It's the prepaid card with training wheels.

In a move that differentiates American Express from other prepaid debit cards on the market, the company will now offer prepaid users with good track records the chance to upgrade to a full-fledged charge card, according to a story on

For consumers with a thin credit file or no credit record at all (students), this could be much-needed way to onramp into a credit card. No other prepaid debit card offers a similar path to credit.

Amex said it's also adding more features to its prepaid cards including direct deposit, higher limits for ATM withdrawals and more ways to load cash, according to MainStreet's story. Users could direct deposit their paychecks onto the cards.

This all comes with a price tag, of course. American Express prepaid cards cost approximately between $122 and $205 in fees annually, according to prepaid comparison site By comparison a low-balance basic checking account costs between $84 to $180 per year in maintenance fees at some of the big banks.

As more banks get rid of free checking for customers with relatively low balances, the market for prepaid debit cards is expected to grow.

AmEx is not the first company to try and make a connection between prepaid cards and building credit.

Suze Orman's new prepaid card, the Approved Card ($195 per year), shares data with TransUnion. Even as TransUnion is getting the information from Approved Card users, it has yet to use the information in credit reporting. Orman said she needed 10 million Approved cardholders to sign up for the credit bureau to consider such data for indicator purposes.

Currently reporting bureaus don't consider prepaid cards in a consumer's traditional credit file because there is no borrowing--or credit--involved. Prepaid cards may look and feel like credit cards but they are much more like debit-cards, where consumers can preload them with cash and can only spend what they have available.

American Express charge and credit card holders tend to have very good credit scores. Nearly 80 percent of Blue card holders have a credit score over 700, according to

In a push to get new customers, the company is now selling its lowest-cost prepaid card, the Bluebird, at Wal-Mart stores on the West Coast, according to the Wall Street Journal. Those cards will not be a part of the credit-building initiative, according to