I’ve only known American Express’ BlueBird product as a great way of earning points, and especially meeting minimum spend requirements for credit card signup bonuses — buy Vanilla Reload cards (my local CVS still stocks them and takes credit cards) at $3.95 per $500, load the money onto the Bluebird card, then either have Bluebird make a payment to my credit card or transfer the funds back to my bank account.

But that’s not really the purpose on Bluebird, and you can get a clue for what it actually is by noting that it was launched in partnership with Wal-mart.

It’s a fabulous product for the unbanked. It started out as a prepaid American Express debit card that also served many of the functions of an online checking account. You could get cash from an ATM. You could use funds in your Bluebird account to pay bills (it has an online billpay function). You can transfer funds to and from accounts.

And there’s just about no fees attached (the only real fees involve ATMs). In fact, it’s much better in some ways than ‘traditional’ checking accounts since those have been piling on the fees ever since the passage of Dodd Frank financial reform (as the legislation made the median retail customer less profitable, and banks were trying to recoup their servicing costs).

Banks often charge monthly fees now if you don’t carry a substantial minimum balance. And even my beloved BankDirect — with which I’ve been earning American Airlines miles as my primary checking account for 10 years — has instituted a $12 monthly fee regardless of account balance.

But Bluebird doesn’t charge such fees. And it’s now become a full-fledged checking account, according to American Banker.

American Express (AXP) has just given its checking account alternative, Bluebird, more bank-like checking account features. It has added FDIC insurance, increased the amount of money a customer can place in an account and added physical checkbooks.

The New York credit card company said Bluebird customers who can already deposit checks by snapping a picture from their smartphones, electronically pay billers and send cash to friends, can now place up to $100,000 into their accounts annually. Previously, a customer could only keep $10,000 in an account at any one time.

Apparently Wells Fargo holds Bluebird deposits and that’s how they get FDIC insurance coverage (funds received by Bluebird are moved to Wells Fargo within 24 hours.)

And already some of this new functionality is apparent. When you log into your Bluebird account under the ‘my account’ tab at the top you can now ‘order Bluebird checks’

While the check order page shows prices, checks are free until May 21 (even shipping is free).

50 Bluebird Checks:
$19.94 + $5.94 shipping & handling

100 Bluebird Checks:
$26.94 + $6.94 shipping & handling

Checkbook order fees are waived until 05/21/2013. While fees are waived, you are limited to one order.

Note that Bluebird checks require pre-authorization, you enter them online before writing the check and then put the authorization number you receive on the front of the check. And checks for more than $2000 take 1-2 business days to get a pre-authorization number. (Once pre-authorized, funds are removed from available balance, not that Bluebird pays interest but like online billpay there’s no opportunity for a float.)

According to the American Banker piece, they’re also introducing mail-in deposits. Bluebird can also now accept government payments “such as Social Security checks and tax refunds” and indeed when I log into my account I get a popup about depositing my tax refund into Bluebird.

I do think this is very cool, Bluebird is an increasingly valuable product for many in the country… not just for those of us who like funding them with Vanilla Reloads purchased by credit cards. It seems a genuine service to the previously unbanked, and I wish Amex incredible good fortune with this product.

However, as they make it more and more like a checking account and with new ways to add funds into the account, I wonder how long the Vanilla Reload relationship will last. Will American Express need to pay them to make it possible to load funds, when there are other ways to do it? And if that relatonship eventually goes away so too will the ability to “buy money with money” that can so easily be put back into a bank account. Bluebird would ultimately be killed, not by the deal’s overexposure, but by the product’s own usefulness and maturity.

(HT: Milepoint)