I'm just gonna bet that the amount of money Walmart makes in interest on those "vaults" is a lot more than the few thousand bucks they dole out monthly to random users...
So? The people targeted for this card are those who otherwise aren't saving anything. The same people would be subject to larger fees at a bank and get sub-1% rates on a savings account. They benefit from this program. Why should Walmart not see that hole in the market and exploit it? Isn't that what this community is all about?
Yeah, I doubt it's much of a money maker for WM, even at WM's scale, as the transactions are so tiny. The bigger win is presumably that their customers might have some money to spend later on.
It's really just layaway without tying up a product. The customer benefits because the cash is safe. Walmart benefits from the goodwill and high probability of the money being spent with them.
Capital One 360 pays 0.20/0.75 APY (checking/savings respectively) with no fees or minimums (I'm sure others do too, I just happen to be a customer ^).
So... they are not benefiting. They are losing out on interest and a real bank account, and Walmart is seducing them to stay with a lottery.
Capital One 360 is for people with better credit than the folks in the article have. If you have means then you get better investments. Heck, a lot of the people in the article are rejected just trying to open a bank account.
AmEx allow direct deposit to their Bluebird card which is another Walmart card.
The article mentions that many people are unbanked because they fear overdraft fees, or have had to pay them before. This is a well known problem, and it drives people to use check cashing stores and debit cards like the one WalMart offers instead of banks.
Not always, my debit cards have always had the overdraft facility turned off. If there's no money in the account then the transaction doesn't go through.
That's how a win-win works. If Wal-Mart can make a profit by getting people to save money there's nothing wrong with that. Especially when compared to the banks that make significant money fining you for being broke.
Except that by giving walmart money that could be invested conservatively, you've actually losing money to inflation. True, this is exactly what most people do with their banks, but banks aren't win-win either, they're both businesses that offer these services because it makes them money.
How do you expect the factory worker to start investing her <$500 savings?
Interest is a waste of time anyway these days. My credit union is paying 0.10% on savings accounts under $100k, and something like 0.25% over that amount. A "high yield" online only account might pay as high as 1%.
Often the poor are poor because of a lack of financial literacy. I've seen it in those around me, and in my own parents. Getting people to save money for a rainy day is powerful. I've started doing microloans to help lift my friends up too, I made it.. and with a little help, maybe I can lift them up with me.
The people who use the WalMart debit cards are not the kind of people who invest money, or even normally save it. They are poor people who often have zero cash savings, and now they have some.
Your first $1000 should be considered an emergency fund much more than an investment. Everyone should have or work towards having $1000 to their name, but way too many are living paycheck to paycheck and saving literally nothing.