It’s easy to blast Suze Orman for her issuing a new prepaid debit card, The Approved Prepaid MasterCard, and to draw parallels to the ill-fated Kardashian Card (though maybe not as fun). As prepaid debit cards go, though, it’s not bad. But that’s the problem: it’s not that great either.
Suze Orman has a lot more clout than what you’d gather from looking at details of this card. In other words, if Suze weren’t behind this card, it wouldn’t have garnered attention showered upon its launch. But hopefully she’ll pay attention to the feedback and shape it into something worthy of what you’d expect from a wildly popular and outspoken personal finance guru with millions of fans through her books, Oprah appearances, and television show.
What problems with the prepaid card industry can Suze Orman tackle—and how does her card stack up?
The Fine Print: My colleague, Credit.com Credit Card Expert Beverly Harzog, wrote last year about the difficulty of finding card details in the fine print. As she pointed out in her post, “Credit cards have the Schumer Box, which contains the APRs and fees. But with prepaid cards, the fees could be in a box or hidden within giant-sized paragraphs.”
I spent some time on the Approved Card website and found it to be pretty clear. A “fees” tab on the top of the Approved Card website leads to a page with a describing the fees in large type. The cardholder agreement is also pretty good, as far as those goes. If she wants to set the standard here, I’d like to see her add information that states clearly how to avoid the various fees. (Update: In the comments below, Jessica, a.k.a. The Debt Princess, points out that there is in fact a page on the Approved Card website that notes how to avoid fees. Thanks, Jessica.)
The Fees: Speaking of fees, the fees on the Approved Card are generally comparable to what you’d get from a moderately priced debit card. If you’re careful and you understand how to avoid fees, you may be able to get away with paying $3/month. But again, could she do better?
Beverly says she’s disappointed that the monthly maintenance fee is isn’t waived if you use direct deposit. The fee that most bugs me on this card and others, though, is the live agent fee. It’s waived for the first call per month, but if you need to talk with someone about a problem more than once a month you’ll have to pony up $2 a call. Her video says she wanted to create a “place that really valued you, and that put people first,” but I’m not sure that this customer service fee is in line with that value. People with bigger problems that require multiple customer service calls will get hit the hardest. I wouldn’t be surprised if they started calling into her show with customer service questions.
Safety: In a previous post about the pros and cons of prepaid cards, I noted that consumer advocates are concerned that prepaid cards don’t have the same protections as credit cards under federal law. And the funds deposited on some cards are not covered by FDIC insurance. Funds on the Approved Card are covered by FDIC insurance, though. And now that the CFPB has a director, it may be able to regulate these cards to ensure greater consumer protection.
In the meantime, it would be a good idea for Suze to make absolutely certain her fans who get this card understand that it doesn’t provide the same protections against fraud or billing problems that credit cards do. With a credit card, for example, if you buy something online and it’s not delivered as promised, you can dispute the charge on your billing statement. But with a prepaid card, there’s no similar protection—and by the time you discover the problem, the money may already be out of your account.
Credit Building: Debit cards don’t build credit, as Suze herself acknowledges. “You might not know it, but your purchases and other transactions using a debit card are not reported to the three major U.S. credit bureaus, TransUnion®, Experian®and Equifax®, so they’re not included in your credit report. That means your credit report can’t reflect responsible debit card spending behavior,” notes the website for the Approved Card.
She is offering free TransUnion credit reports and scores with this card—a nice perk—but the card falls short of offering anything really revolutionary on the credit front. Her site talks about how the card will be used for “The Credit Project,” an effort to share anonymous user spending data with TransUnion to see whether there is something there that could be used for credit scoring. So in other words, her fans get to pay to be part of an experiment that may help a credit reporting agency find a new way to market consumer data.
Maybe she should have come up with a co-branded secured card instead. It would have forced her fans to save money for a deposit account, and payment histories could be reported to the credit reporting agencies, helping cardholders build or rebuild good credit. She could have included a graduation feature, at which time those who managed their accounts carefully would get an unsecured card—and get back that money from their deposit to help seed their emergency savings account.
Again, Suze Orman’s Approved card could—and should—be something that will really help her audience improve their financial lives. A pretty purple card with a great name just doesn’t seem to be enough. But hopefully she’ll find a way to get there.
Image: David Shankbone, via Wikimedia Commons