Suze Orman card: Rip-off or righteous?

TV personality Suze Orman arrives at OWN: Oprah Winfrey Network's 2011 TCA Winter Press Tour Cocktail Party on Jan. 6, 2011, in Pasadena, Calif. / Frazer Harrison/Getty Images

COMMENTARY: Suze Orman, the CNBC personal finance personality, introduced a prepaid debit card last week that's got the entire financial world buzzing. The reason? Pundits apparently can't decide whether the card is a "financial revolution" (as the overactive imaginations of Suze's press people labeled it) or "the stupid investment of the week." (Credit the "stupid investment" comment to MarketWatch's Chuck Jaffe, a long-time financial columnist and commentator.)

In reality, Suze's "Approved" card is an also-ran financial product that offers limited benefits to a small subset of the population. Most people could do better - much better - elsewhere. The only reason the card is worth talking about at all is because Suze is the queen of hype, so high-profile and vehement about her financial advice that she's inspired a series of lifelike Saturday Night Live spoofs.

At the same time, she has a loyal following of people who appear willing to take her advice, no matter where it leads. In this case, her advice would lead you to buy a piece of purple plastic that comes with a load of little "gotcha" fees and few unique benefits.

Let's take a step back and start from the beginning.

"The Approved Card from Suze Orman" (yes, that's the full title emblazoned across the top of the card's purple plastic) is a pre-paid debit card. You don't need a bank account to have one. You buy them like you buy the Russell Simmon's Rush Card or Green Dot's prepaid Visa and MasterCards.

If you have a checking account, any one of these cards is a bad deal. Your bank or credit union will provide a debit card for free, with no monthly maintenance fee. (Thank Bank of America for that, since it's "test" of a $5 monthly maintenance fee got shouted down with such force that no other bank dared tread that scorched earth.)

Suze is basing her better-than-the-competition claim on the fact that her pre-paid card's purchase fee is just $3 - that's $1.95 lower than the purchase fee for GreenDot and 95 cents better than the best-option Rush card. In addition, the Approved card's monthly maintenance fee is $3 vs. the Rush card's $9.95 monthly levy. Green Dot, however, waives all monthly fees for anyone who loads their card with at least $1,000 deposit each month - as you likely would if you were using this in lieu of a checking account.

Suze's card is better than the Rush card, but that's because the Rush card is so expensive that it serves only as proof of the ironic and sad reality that it's expensive to be poor.

When you compare Suze's Approved card to a decent option like GreenDot, it's not exactly a sweet deal.

In addition to the card purchase and monthly maintenance fee, there are 18 (count'em) additional fees that could be levied against cardholders, including a $2 fee for calling a customer service rep more than one time in a month. At GreenDot, the fee structure is much simpler. There are eight potential fees, including the purchase and monthly maintenance. That's a a full dozen fees less to worry about than with the Approved card.

Suze said in a press conference that if consumers use her card "exactly how I tell you," it will be the cheapest option. Of course, GreenDot could say the same thing and they would have far less nagging to do.

"It's far more complex than the other top-tier cards," says Odysseas Papadimitriou, chief executive of CardHub, which analyzed the pre-paid card because of Suze's pre-launch claims that it would help your credit score. Most of the 20 different potential fees can be waived if you deposit a set amount on the Approved card. But, one misstep and you get nicked.

Moreover, the claim that the Approved card might help your credit score is also untrue.

In the press conference launching the card, Orman acknowledged that the even though she will be sharing consumer's purchase data with one of the major credit bureaus -- TransUnion -- TransUnion will not be using the data to help Approved card customers build a credit file. They may someday. But they're not now and there is not even a promise to do so in the future.

If you want to build your credit, you need a secured card, says Papadimitriou. And there, too, you can find cheaper options. Cards with low annual fees; that demand less on deposit; and that charge no interest if you pay off your balance every month.

Who does this card benefit? People who don't want a secured credit card, cannot open a regular checking account because they've got such bad credit that neither bank nor credit union will accept them, and who are so poor that they cannot deposit $1,000 a month on a GreenDot card. It's only at the intersection of no credit/bad credit and poor that the Approved card is the best deal.

To put this in Suze-speak: "Girlfriend, you can do better than that."

[Day2Day_Money_Educator]

I have to comment on your reference to the irony that it's expensive to be poor, particularly since it infers that the poor pay higher interest rates on credit cards and loans and do not qualify for affordable checking accounts and debit cards. I teach against this type of generalization all the time.

It's not one's income level that determines their interest rate. It's one's ability and choice to borrow only what can be repaid. Nobody in this country is forced, from anything I've read in the constitution or even in the news media, to borrow money. We get into debt for consumer items (wants, not needs) or because we haven't learned how to use credit responsibly.

I've met students and clients of all income levels. Many low-income individuals are able to build their credit wisely, pay very low interest rates and have great credit ratings. I've also met many high income individuals and couples (earning $10k-$15k or more per month) who have terrible credit card interest rates, can't afford their minimum payments and have never learned to say "no" to their wants.

Continually saying that creditors and banks punish the poor contributes to the victim mentality among many in this country (at all income levels) that perpetuates an acceptance of poor financial choices that result primarily from an accepted ignorance (in the technical sense) of better options.

[Jeffsteph1]

An important point on Kathy's article is what I interpret as a rather 'glib' advise that anyone can get a checking account with a debit card that doesn't cost them anything. This unfortunately is terribly misleading in this era of banking. No bank provides a card with out a minimum deposit, requiring either direct deposit or a minimum balance to avoid monthly fees. While I know the Orman Debit card is not free - it provides a two fold benefit to individuals who need to improve their credit worthiness. Something most banks do not give an bit about. I've been with several large banks over my 50+ years of banking. I follow high interest and keep only minimum balances in banks that require minimums. If I can I try to keep at least a CD in an mutual account so the minimum never drops below, and I get charged. Otherwise - small banks, LOCAL banks are the best option. You may need to drive further and have fewer ATM options but they are the best for customer service and care about you.

[Karlukes]

I use uSe this card for my 14 year old daughter and love it. I direct deposit a certain amount to her out of my paycheck and this is her allowance. It teaches her how to balance her budget and let's me see how she spends her money. With times being what they are today you don't want your child walking around with money in her pocket and guessing how she is spending it. Plus, no overdraft fees..

[sjolley2]

I am a Elder Financial Abuse Consultant and Consumer Advocate. Suze's "Approved Card" is an amazing tool for prevention of Financial Elder Abuse. There are so many uses but here is one example: Mom has Alzheimer's and has a Caregiver. I live in another State. Mom's Caregiver sometimes makes necessary purchases for mom at the Store, pharmacy, medical appointments, Vet, etc. The caregiver can pay Mom's bills online with the Approved Card. I load funds onto the Approved Card, from one of my bank accounts, her Bank Account, or direct deposits from her Social Security (or any other Bank Account, such as my siblings. The Caregiver has a second "Approved Card" and each time she makes a purchase I get text alert within seconds with the amount spent and balance remaining. I go on the Approved Card website and have an electronic trail of what was spent, where, and date and time. The only cost to me is $3.00 per month for up to 4 cards. There is no reason to incur any other fees since all the information and support is available online 24/7, in addition to balance and expenditures in text alerts. I have enough stress worrying about Mom and the progression of Alzheimer's. The "Approved Card" gives me comfort that my mom is not being financially taken advantage of. Although I trust the Caregiver, she is in another city and with the Approved Card there is no temptation.
And, for my sweet trusting Mom I don't worry about her vulnerability when someone asks to "borrow" money if she could just write a check. This happens everyday to other Elderly people - but not to my Mom. Thank you, Suze!

[lifeinterruptus]

Hello Kathy,
In fact, I believe that you along with some other authors here have gone to the self-righteous state of mind by claiming that prepaid cards, in general, I used by those without checking accounts, non credit worthy POOR people. Well I am here to tell you that I am neither one of those, and I happen to be a very happy customer of both GreenDot and Walmart Visa prepaid cards, along with my checking account. They are excellent to pay bills and subscriptions online as well as just a much more secure way to spend money in restaurants, gas stations, super markets, and other establishments, where the personal data of traditional debit account holders has been stolen. This is precisely why I am using my cards. Like everything else in life, pretty much, they come with some rules, just like our checking accounts do, by the way. Only if you forget to reload your prepaid visa, nothing happens, you get a declined transaction or an Email and fix it quickly. If you forget to deposit a check or if someone steals your card, the bank will charge you up the wazoo.

Oh, one more thing, on the collaboration with TransUnion; this is clearly a path for the future possibility of this offer becoming a real credit card, regardless what they say at the moment. We are living in rapidly changing times, where all of us, including banks and credit bureaus will have to adapt.

When I started using the prepaid card a couple of years ago, few employees new how to reload my card, and most people had no idea what they were. Now they are available everywhere, and they work much BETTER than any bank. It's not a problem to have both, in fact, it's perfect, and no, you don't have to be poor to use it, and yes Suze is right, if you use it correctly, just like anything else in life, if you play by the rules, you will come out on top.

[JamesStein]

The biggest misunderstanding about Suze Orman's prepaid card, unfortunately stoked up by Orman herself, seems to be the notion that the Approved Card, as it is called, can help its users improve their credit scores. So it's time we set the record straight: the Suze Orman's card does not affect your credit score in any way, either positive or negative. Colleen Tunney-Ryan, a spokeswoman for TransUnion, a credit bureau that has partnered with Orman to provide her card's users with access to their credit reports and scores, states it plainly: "It is important to understand that this data will not appear on any TransUnion credit report at this time." I think that should settle it. Learn more here: http://blog.unibulmerchantservices.com/suze-ormans-prepaid-card-will-not-affect-your-credit-score.

[Joe_Taxpayer]

Careful, if you don't think this card is great, Suze thinks you're an idiot. The precise word she used towards the financial bloggers who made observations similar to those here.
The best Suze can do is admit her mistake and cancel this program. The card has little use, and no value. It's aimed at the 'unbanked.' These people need help, not to be ripped off by those they admire.

[samynarayana]

People who use hype and celebrity status to cheat gullible masses must be dealt with severely - under islamic punishment system. Cut their fingers, gouge out their eye sight and things like that. It is the greedy people who make billions of dollars for themselves fooling and at the cost of millions of people are anti-christ.

[RRawpower]

Re: ". . . no monthly maintenance fee. (Thank Bank of America for that, since it's [sic] 'test' of a $5 monthly maintenance fee got shouted down with such force that no other bank dared tread that scorched earth.)"

NOT so! Almost precisely at the time of the (latest) BoA debacle, Citibank managed to come up with a very sneaky workaround scheme. Whereas my Basic Checking account used to be "free" as long as I had more than four debit card transactions per month, Citi now applies a monthly service fee of $10: fully TWICE the amount BoA attempted, which is only "waived with either 1 Direct Deposit AND 1 Bill Payment OR $1500 in average combined deposit balances."

As one of the all too many purportedly "overqualified" (read: age-discriminated) nowadaze and unemployed more years than I care to admit, Direct Deposit is obviously no option, nor can I remember the last time I accrued a bank balance over $1500.

The point, therefore, is not mere idle complaint but, rather, to emphasize the onerous tactics such corporations constantly employ without apparent scrutiny nor criticism by either news media or the public at large. CBS MoneyWatch and Ms. Kristof should know better . . .

[wkb4447]

Suze has never had a lot of credibility with the majority of the public anyway. She did sell annuities for several years and now soundly denounces them without qualification. It's called "The Suze Orman SHOW" for a reason. However, I don't even find her entertaining. Annoying, yes.