Suze Orman’s Prepaid Debit Card: Just the Lesser Evil of Prepaid Options

Suze OrmanPhoto: David Shankbone

Suze Orman has long been a champion of smart financial choices. As the author of books including The Money Class and The Money Book for the Young, Fabulous and Broke, not to mention the host of her wildly popular show on CNBC, her no-nonsense attitude has helped inspire many readers and callers to get out of debt and get their finances in order.

Suze has never shied away from opportunities. The best-selling author’s latest venture is a financial product that has caused a stir in the media. She has offered her image and reputation in support of a prepaid debit card.

What Is a Prepaid Debit Card?

Prepaid debit cards are similar to credit cards. You can use them in the same situations, whether in a physical land-based store or shopping online. They primarily operate over the same Visa and MasterCard networks.

The similarities end there, however. While credit cards let you spend more than you may have, usually with a soft credit limit, prepaid debit cards require users to deposit cash in advance. You do not have a bill to pay at the end of the month. Other (non-prepaid) debit cards are linked to your bank account, but prepaid cards use their own system for deposits.

This unique method of operation makes prepaid debit cards ideal for people who do not otherwise qualify for credit cards or bank accounts. There’s also a portion of the population that does not trust the financial industry. In some cases, products associated with a popular figure like Suze Orman, hip-hop mogul Russell Simmons or even the Kardashians, can help introduce the “unbanked” community to responsible use of financial products.

Unfortunately, the cost of operating prepaid debit cards is passed onto the customers–and it’s passed on aggressively. Knowing that customers opting for prepaid debit card products have few other choices for plastic, issuers are able to charge more fees. And fees are taken from customers’ deposited balance, so they are collected without fail.

How Does the Approved Card Stack-Up?

The fees for Suze Orman’s The Approved Card are numerous. These fees, as well as the idea that using this prepaid debit card will not affect credit scores as Suze intends, have triggered backlash in the media, particularly among financial bloggers, whose reporting doesn’t need to be as balanced as mainstream media’s.

Suze’s card is not the worst in terms of cost of ownership, but it is not the best, either. With a $3 sign-up fee, a $3 monthly fee, various fees for bill payments up to $30, a $2 fee for callng customer service (beyond one free call each month), the Approved Card could easily be more costly than using one of the best credit cards without an annual fee and paying it off in full every month.

That’s a faulty comparison, though. People whose best choices are prepaid debit cards must compare the options available to them. Cash is the best and the most cost-efficient, but paying a bill or buying a product online has proven to be difficult with cash.

Customers who can’t or won’t open a checking account to receive a bank-issued debit card need to contend either with secured credit cards or prepaid debit cards, both often riddled with fees.

The unbanked community also relies heavily on products much more financially damaging than prepaid debit cards, including payday loans and check cashing storefronts. The Approved Card is the step in the right direction for users of these products, but it’s not at the top of the list.

A less expensive option is the American Express Prepaid Card. The best feature of this card is the lack of monthly fees or fees to load the card, unlike many prepaid debit cards and secured credit cards. While Suze Orman’s Approved Card may stack up well against the Rush Card and other products that take advantage of customers whose choices are limited, it can’t compare with the competing option from American Express.

Suze Orman’s Plans for Her Debit Card

As a personal finance guru, Suze Orman encourages behaviors that improve a consumer’s credit history and score. Although she has formed a partnership with Transunion to offer free credit reports, remember, you can receive free credit reports from the official

The card will also provide transaction detail to Transunion, similar to how credit cards report usage, but none of this information will affect your credit history or credit score.

Nor should it. A credit score should reflect how responsible a consumer is with using and paying back borrowed money; a debit card does not serve the same function. You can only spend what you have.

While Suze Orman’s prepaid debit card has some good qualities when compared to the worst of the prepaid debit cards and other products often used by those without bank accounts, it is not the best option on the market today for these users.