Financial expert and TV personality Suze Orman throws her hat into the prepaid debit ring.
Bear with me, here. I know this is credit card week on CreditUnions.com, but I’m not going to talk about credit cards. I’m going to talk about another plastic product: prepaid debit cards. It’s not the same thing, I realize, but it’s in the realm of payments, and this discussion is just too sweet to overlook.
For those of you who have been avid readers of Off the CUff*, you might remember a series of blogs I wrote about the ill-fated prepaid debit card endorsed by Kourtney, Kim, and Khloe Kardashian (read: How (not) to Keep Up With the Kardashians, How (not) to Keep Up With the Kardashians (New Year's Update), Debit Doubts?). **
A year ago, CBS’ MoneyWatch said prepaid debit cards were one of four ways to beat high bank fees (yes, it cited credit unions as another option), and it looks like in 2012 financial guru Suze Orman will join the likes of K3 and hip hop icon Russell Simmons in offering a prepaid debit card.
“Suze is turning her firepower to a different kind of card,” reporter Juju Chang says in this ABC News video. “Warning against the pitfalls of debit cards, especially prepaid debit cards.”
According to Orman, she invested time, money, and wisdom into this card, building the product from the bottom up.
“I wanted to bring to America a place that they could feel proud to bring their money home to, an alternative to a bank, where people knew I was going to put their needs first,” Orman says in the ABC video. “I want a card that is better than cash.”***
To create such a product, the card is being heavily marketed as a product that will help those middle class, cash-only consumers establish credit. For a testing period of 18-24 months, Orman’s “Approved Card” will share information with TransUnion. From there, the credit rating agency will decide if there is anything in users’ history that enables it to decide whether a consumer is more or less creditworthy.
"It's a marketing gimmick, plain and simple,” Evolutionfinance.com CEO Odysseas Papadimitriou told Business Insider. Although Papadimitriou did give credit to the card for having “pretty good terms.”
Orman admits she wants to make a profit but says that is not her primary motivator and would “take away” the monthly $3 service fee if the card takes off.
Fees? Yes, that is correct, even The Approved Card comes with fees, although: “This card is fully transparent,” Orman says. “There are no hidden fees.”
According to The Approved Card’s website, those transparent fees include:
- Unlimited withdrawals from AllPoint ATMs … if the user has a qualifying $20 monthly direct deposit or bank transfer, otherwise the cost is $2
- One FREE phone call with a customer agent; subsequent calls cost $2
- FREE domestic ATM balance inquiry … again, if the user has a qualifying $20 monthly direct deposit or bank transfer, otherwise the cost is $1 plus whatever fee the ATM owner charges
- $2 paper statement fee
- FREE electronic bill payment; paper check payments cost $1
- Bill payment inquiry, $30 per transaction (definitely NOT FREE)
If you use the card exactly how she suggests, Orman guarantees the user will spend no more than $3 per month. The problem is, I don’t see how this card frees consumers from the evils of big banks. And I bet most banking representatives would give an equally reasonable estimate for the out-of-pocket expense of their products if used exactly how they suggest.
I applaud Suze’s attempts to give American consumers a debt and overspending intervention, but I have to question whether this is a sincere strategy.
* Did you know?: Off The CUff celebrated its two-year anniversary on December 4, 2011.
**Kardashian Kard update: According to The Hollywood Reporter, a California judge basically dismissed the lawsuit brought by Revenue Resource Group against K4 (the three sisters plus mother Kris Jenner).
*** This is not the first time Orman has given her financial stamp of approval. Last year she appeared in a series of television spots touting the similarities between NCUA and the FDIC.