Into the Black Hole

I’m late on this and in fact I wasn’t even planning to write about Suze Orman’s new prepaid card, but there’s been so much fuss around it that I felt I had to put my two cents in. What actually finally convinced me to do so was the way Orman responded to her critics. Rather than address the legitimate points some of them were making, she’s chosen to fire back a number of angry tweets at them instead. That doesn’t seem to have done her much favor.

But what’s worse for Orman is the fact that she is offering nothing more than a relatively good prepaid card, which is nothing like the glorified solution to all of your financial problems her website promises. Let me explain.

Suze Orman’s Approved Card

The Approved Card, as it is called, is a MasterCard-branded prepaid card, which can be ordered at www.theapprovedcard.com. It is a typical open-loop prepaid card that costs $3 to buy and has a $3 monthly fee. There are a number of other fees (listed here), most of which can be evaded by making at least one direct deposit or a bank transfer of $20 or more each month. One of these evadable fees is the $2 ATM withdrawal fee for AllPoint-operated machines.

Then there is a list of fees that cannot be waived, such as the charges for non-AllPoint ATM withdrawals, over-the-counter cash withdrawals, paper statements, card replacements, customer service calls (after the first one, which is free), etc.

So what are we to make of it?

Just Another Prepaid Card

That’s all it is. The Approved Card is not a bad prepaid card, but it is nothing more than that. Nor is it the best one out there. The American Express prepaid card, for example, is free to get and comes with no monthly fee at all.

Still, “[o]nly $3.00 a month if you use it how I tell you to,” as Orman reminds us on the card’s website. That’s not that bad, is it? Well, besides the fact that AmEx’s card has no monthly fee at all, there are two points that can be made in response to this promise.

The first one is actually made very well by SmartCredit.com’s John Ulzheimer:

At the end of the day, it’s still $36 a year to have access to your own money… I can go to a credit union tomorrow, stick five dollars in an account, open an account, get a debit card and it’s going to cost me the grand total of nothing.

Of course, one legitimate objection to this argument is that prepaid cards are designed for the “unbanked” — consumers with no access to a bank account. The issue with this rebuttal to Ulzheimer’s argument, however, is that Orman seems to be telling us that the Approved Card is the “smart choice” for everyone.

That brings me to my second point. If the “unbanked” always used credit as they were told, which is what Orman is asking of them, they would not have been cut out of the system and would never have needed Orman’s card in the first place. Why should we believe that they would follow Orman’s advice?

Suze’s Response

And then there is the way Orman responds to tweets of her critics’ reviews. Here is what she has to say about Ulzheimer’s critique:

read the great reviews of legit reporters or ones that are smart enough to understand what I am doing. There are many Suze haters

Then there is this tweet targeted at PT Money’s Philip Taylor:

Too bad you choose to believe an idiot over me- you just keep following others and see where it gets you

The list goes on, but you get the picture and it’s not a pretty one. I just don’t see how this is helping Orman’s cause.

The Takeaway

Prepaid cards can be a great choice of payment method for some consumers. For most of us, however, there are better options available and Americans should not be misled into believing otherwise.

If you have a reasonably good credit, now is a great time to open a new credit card. Issuers are mailing out some incredibly good offers, featuring sign-up cash bonuses sometimes worth hundreds of dollars, in addition to the standard 0% APRs on purchases and balance transfers to which we are accustomed. And even if your credit score is less than great, you can still get a very good offer.

Debit cards would be the best option for everyone else, provided they had an active checking account. This may cost you a few dollars a month these days, as Orman’s card also does, but you will get all the features of a full-fledged bank account that a prepaid card does not offer.

So the Approved Card is a better-than-average prepaid card, but it should only be your third- or second-best payment choice, depending on your circumstances.

Image credit: Theapprovedcard.com.