Tandem Money is a prepaid card that is combining a prepaid card, savings account, and a line of credit onto one card. Only customers who agree to direct deposit and who set aside some money in a savings account are eligible to borrow money. Two banks are involved with the card, one to offer the prepaid card and the other to offer the savings account and line of credit. Bank Talk describes how the cards work and includes a link to a promotion video at its Web site:
The customer must agree to transfer at least twenty dollars per month to the savings account side of their tandem money account. The account earns one percent interest.
The customer can tap the line of credit. Notably, though, the line of credit is not accessed merely by over-drawing the spend side of the account. In fact, there is no overdraft on any prepaid card with a Tandem Money account. Remember that the Insight Card is one of the few prepaid cards that does have overdraft. Nevertheless, the Tandem Money accounts are restricted from overdraft capability. To access the credit, the TM account holder has to go to the TM website and initiate the process of moving money from the credit line over to the spend side. Tandem uses a formula, based upon the size of the direct deposit and the longevity of the direct deposit history, to determine the line of credit amount.
Savings accounts have been shown to increase the life of prepaid cards, and credit for mow and moderate income people continues to be a need that prepaid cards have not solved. This product may be a step towards turning prepaid cards into a full bank replacement by offering a range of financial services outside the traditional framework of a bank.
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