American Express Co. is launching its first consumer checking account and debit card as the financial-services giant seeks to capture more everyday spending and bolster its appeal with younger users.
The company announced Tuesday its new digital checking account, which carries a 0.5% annual percentage yield (APY), and an associated debit card, which will allow cardholders to earn points through Amex’s Membership Rewards program.
Amex AXP, +1.09% has been making a big push lately to win over millennial and Gen-Z spenders, a move that the company says is paying off within its credit-card business thanks in part to rewards that match what younger shoppers want.
With the new checking account and debit card, Amex continues to focus on “being incredibly relevant and highly valuable to those segments,” said Eva Reda, the general manager of Amex’s consumer banking business.
Amex initially will launch the products to existing holders of its consumer credit cards. They will have the ability to earn one Membership Reward point for every $2 that they spend on eligible transactions, something that could make the card stand out in the current U.S. debit landscape.
While U.S. consumers generally have grown accustomed to lucrative rewards offers on credit cards, there are fewer chances for spenders to earn rewards on debit cards, partly because of rules put in place after the 2008 financial crisis that capped debit interchange fees. In the credit world, financial-industry players use higher interchange fees to fund rewards, but they don’t have that same leeway with debit cards due to the interchange caps.
See more: How debit cards are becoming ‘a democratizing force’
Reda acknowledged that debit rewards are “unusual” and told MarketWatch that Amex’s rewards “are a super important part of the value proposition” for the new card, along with what she says is a checking APY significantly above the national average. The card will also offer purchase-protection features and free ATM withdrawals at MoneyPass ATM locations.
Reda expects that some customers will choose to make the new checking offering their primary account, while others will use it as a secondary bank account.
Consumers have grown more accustomed to using cards over cash during the pandemic, and the launch of a debit card could give Amex more chances to capture this increased card spending. Reda anticipates that cardholders will use the debit card for smaller purchases, which would be in line with typical attitudes toward debit.
Shares of American Express have gained 6.3% over the past three months as the Dow Jones Industrial Average DJIA, +0.00%, of which it is a component, has slipped 3.4%.