Suze Orman Launches Controversial PrePaid Debit Card

January 9, 2012
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Millions listen, watch and read Suze Orman for what they believe is unvarnished consumer and financial advice. But has Orman crossed the line by launching what could be a controversial prepaid credit card under her name?

 That is the question that New York Times’ Ron Lieber explores in his Your Money column. Other financials experts also weight in, check their reaction below.

 Consumer advocates need to earn money, but the hungrier they get the more they risk losing their credibility. Consumers at some point need to ask who is Orman looking out for? Her book business? Her CNBC television show? And now her debit card which she has invested $1 million of her money?

“Never before, however, has she built a financial product from scratch and urged her considerable number of fans to use it frequently. That changes with the introduction on Monday of her Approved card, which works a lot like a bank debit card but does not come with a checking account. It is a prepaid debit card, and companies that offer similar cards have drawn criticism for sky-high fees and poor disclosure. The hip-hop mogul Russell Simmons, American Express and the Kardashian sisters are among those who have piled in with their own cards, and they are nearly ubiquitous at drugstores and other retailers. The target customers are most often people who have little credit history — or credit so bad that banks will not come near them,” wrote Lieber.

“Ms. Orman seeks to broaden the debit card market by charging low fees and offering new services, including unlimited access to credit reports. She has put more than $1 million of her own money into the venture and is prepared to add more, since the product may not break even right away. But her move also raises so many questions that it is hard to even know where to start.”

Another take on the launch of her credit card from LowCard.com:

Suze Orman Introduces Prepaid Card

It didn’t work for the Kardashians. Perhaps it will for Suze Orman.

Orman is the latest celebrity to jump into the prepaid card market.

As a well-known financial adviser with a strong following, she just may have the clout to capture a significant portion of the market.

Prepaid cards have historically targeted consumers with poor credit who could not qualify for a standard credit card. These cards were easy to get, but were loaded with exorbitant fees. That began to change last year when American Express introduced its own prepaid card with fewer fees.

There are some nice advantages to Orman’s Approved Card. It has fewer fees than most prepaid cards: there are no loading fees, no fee to transfer money to another card, and no fee to make electronic bill payments. The card comes with free identity theft protection and also gives the cardholder unlimited credit reports and scores from TransUnion, one of the three credit reporting agencies.

As with any card, consumers need to read the fine print to be aware of the fees that will be charged.

The Approved Card costs $3 to purchase and then has a monthly fee after the first month of $3. ATM withdrawals are free each month as long as they are made from the Allpoint network and you make a direct deposit of at least $20 each month. Otherwise, the ATM withdrawals will cost $2 per transaction.

If you get cash back when making a purchase at a retail store, that will cost you $2.

Your first call each month to a customer service representative will be free, but subsequent calls will be $2.

The opportunity to receive unlimited credit reports and scores from TransUnion can be beneficial for consumers, especially those trying to build their credit. However, the score that will be available will be the TransUnion score, not the FICO score that most banks use when deciding a consumer’s credit worthiness. Orman says TransUnion plans to collect Approved Card user data to determine if it should include prepaid card data on its credit reports in the future.

“A debit card linked to your checking account is much better than a prepaid card for most consumers. A debit card will not have the monthly or usage fees that are common with prepaid cards, even this new one from Suze Orman,” says Bill Hardekopf, CEO of LowCards.com. “But for people who don’t have a bank account, or may have some credit problems, her card may be a good alternative.”

LowCards.com ( http://www.lowcards.com) simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The LowCards.com Complete Credit Card Index ( http://www.lowcards.com/CreditCardIndex.aspx) is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for over 1000 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for twelve years.

And From SMART MONEY:

Prepaid cards allow cardholders to deposit money into an account and to draw on those funds for purchases or cash withdrawals. They’re largely used by consumers who want to avoid going into debt with a credit card and by teens and young adults as a way to learn how to manage money. But prepaid card fees can quickly eat into a cardholder’s balance, and the so-called Approved Card From Suze Orman that’s issued by The Bankcorp Bank is no exception, say experts: It includes a $3 purchase fee to get the card, a $3 monthly account maintenance fee, up to $2 for each ATM withdrawal and as much as $2 to speak with a customer service agent.

“It doesn’t do much to separate itself from the pack,” says Odysseas Papadimitriou, chief executive at CardHub.com, a credit-card comparison site that also studies prepaid cards.

From my friend Chuck Jaffe of MarketWatch

What I mostly have taken issue with is her investment advice, and the hype and hyperbole that frequently seem to be a part of her message, and which spur people to act, but often with sub-optimal results.

When I used to have a radio show, it included an occasional segment called “Why I Hate Suze Orman” which focused mostly on those concerns. Orman, upon hearing that, graciously came on the show (and told me that “hate” is too strong a word to apply to anything). See what I wrote after her appearance on my show.

The hype and Orman’s celebrity are the biggest shortcomings in her newest venture, the Approved Card. It’s a prepaid debit card that in many ways is superior to much of the competition, but where the blinding light of Orman’s fame makes it the Stupid Investment of the Week.

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