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Russell Simmons Vs. Suze Orman: FIGHT!

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Orman-vs-Simmons

With the release of her new prepaid debit card, Suze Orman has been hogging the limelight. While reviews of her “Approved Card” have been overwhelmingly scathing, Orman has, in all fairness, launched one of the cheapest celebrity-endorsed cards to date (not saying much). But Russell Simmons isn’t going to let his famed “RushCard” play second fiddle to this prepaid neophyte. A couple weeks after the Approved Card hit the market and sent financial bloggers in a tizzy, Simmons announced fee reductions for RushCard holders. “Look at me! Look at me!”

Because prepaid debit cards are, as a rule, bloated with fees, the goal is to find the card with the least sadistic fee chart. Let’s not waste any time—let’s dive into the numbers.

This chart includes the RushCard’s newly announced terms.

Fee Pay Monthly RushCard Approved Card
Purchase $3.95 – $14.95 $3.00
Monthly $9.95 $3.00 (waived first month)
Domestic ATM Balance Inquiry $0.50 $1.00 (waived w/ direct deposit or bank transfer)
International ATM Balance Inquiry $1.00 $1.00
Domestic ATM Withdrawal 2 free, then $2.50 $2.00 (waived w/ direct deposit or bank transfer)
International ATM Withdrawal  $2.50 $2.00
Domestic PIN POS $1.00 FREE
International PIN POS $0.00 FREE
Domestic ATM Declined $0.00 $1.00 (waived w/ direct deposit or bank transfer)
International ATM Declined $0.00 $1.00
Over-the-Counter Withdrawal UNLISTED $2.00
Retail reload (Green Dot) $4.95 $4.95
Currency Conversion 2% 0%
Paper Statement $1.00 $2.00
Account-to-Account Transfer $0.99 FREE
Customer Service Call $0.00 $2.00 (1 free call/mo.)
Replacement Card $0.00 $3.00
Express Card Delivery $30.00 $20.00
Bill Payment: Paper Check $0.00 $1.00
Bill Payment: Expedited UNLISTED $9.95
Bill Payment: Check Copy UNLISTED $20.00
Bill Payment: Check Re-issue UNLISTED $15.00
Bill Payment: Payment Inquiry UNLISTED $30.00
Bill Payment: Postal Reject UNLISTED $25.00
Express Cash $30.00 UNLISTED
Inactivity $0.00 UNLISTED
Minimum* Annual Cost $191.40 $36
Expected** Annual Cost $358.20 $202.80

*Conservative estimate of 6 PIN and 2 signature transactions per month; direct deposit; no ATM or other transactions or services; does not include purchase fee

** 2 ATM withdrawals, 10 PIN and 7 signature transactions, and 2 retail cash reloads per month; no direct deposit; no bank transfer; does not include purchase fee

With headlines like “Russell Simmons to Slash Fees,” you’d expect the RushCard to be more on par with the Approved Card. Not so. Here’s what he’s changing: no more bill enrollment, individual bill pay transaction, electronic bill pay, plan change or replacement card fees. The fund transfer fee between RushCards is dropping from $2.95 to $0.99. He’s cutting fringe fees—stuff a lot of people don’t use anyway. He’s not touching the monthly fee or the POS fees, which alone can easily reach over $200 a year. Even with Simmons trimming a few numbers, the Approved Card is shockingly superior.

Simmons’ justification

“I don’t think it’s my job to be the cheapest,” Simmons said. “I want to be the iPhone of the business.” He aims to offer services and features other prepaid cards don’t provide. These currently include online budgeting tools, free two-day advances on direct deposits and discounts on prescriptions and health services. Simmons says he will soon offer payday loans at rates far lower than typical payday lenders.

“I demand constant improvements in every aspect of my company, investing millions each year in innovative new benefits and features,” Simmons says. “Just like Branson and Zuckerberg, I created products that garner strong customer loyalty and evoke genuine emotion.”

Are the RushCard’s services worth over $200 annually? We’ll let you decide.

Suze Orman to cut monthly fee?

Relative to other prepaid options, the Approved Card ranks well. It’s cheaper than many but costlier than some—the American Express Bluebird, for example. But regardless of how it competes with other cards of its class, it remains categorized as prepaid debit. In their current evolutionary phase, prepaid cards are, by and large, detrimental to consumers. They target folks with limited credit, charge higher fees than some of the most advantageous rewards credit cards and do not help users establish a respectable credit history.

Since the launch of her card, the financial press has been bombarding Orman with an unrelenting onslaught of condemnation. Finance buffs know prepaid debit is the pits, and they know Orman knows it, too. The backlash induced an embarrassing Twitter fiasco in which Orman, unable to cope with the criticism, lashed out at several well-respected bloggers and reporters. Considering the media’s reaction to previous celebrity prepaid cards, the inimical reception was predictable, and Orman should have exercised enough forethought to batten down.

As the denigration continues, Orman shows symptoms of surrender. In a recent NPR interview, she hinted at the possibility of eliminating the Approved Card’s monthly fee: “…it is my intention to take that $3 a month fee – or 75 cents a month if you get four cards everybody in your family – that it eventually goes away.” If the fee were indeed eliminated, the Approved Card would be free for users who refill with direct deposit or account transfer and do not require additional services. If these plans come to fruition (though they sound a bit like empty political promises pre-election), the financial press would happily tip its collective hat. Suze, if you’re reading this, kill the fee. The nation will love you.

Road to recovery

Prepaid is trending towards tolerability. As competition increases, issuers will be forced to offer better rates and comprehensible fee disclosures. One of the biggest obstacles will be devising a method for cost-free reload. Both Orman and Simmons offer a few free reload options, including direct deposit, but neither has figured out a way to offer free cash deposits. As it stands, adding cash to a prepaid card requires MoneyGram, Western Union or MoneyPak services—a few dollars a pop. If utilized just twice a month, you’re looking an extra $84 a year.

Hopefully, as prepaid fees drop and cards become less profitable, celebrities will cease vying for a piece of the pie. Advertising with famous faces is a bit unfair from a consumer’s perspective. What does Lil Wayne have to do with personal finance?  In a recent letter, Russell Simmons his expressed his frustration with the financial press’s tendency to lump him in with other prepaid celebrity endorsers:

“In recent weeks, coverage of prepaid debit cards launched by Suze Orman and Lil Wayne has repeatedly portrayed me as a “celebrity endorser.”  Some of these stories have gone so far as to depict my RushCard business in the same light as the ill-fated Kardasian Kard.  The truth is, eight years ago I invested millions of dollars, putting my reputation on the line to found UniRush LLC.”

Russell, let’s be candid with one another. Yes, your involvement in the prepaid industry runs far deeper than that of Lil Wayne or Kim Kardashian. We’ll give you that. But are you leveraging fame to profit from fee-heavy cards that don’t help people build credit? Be honest, now. Are you?

  • http://twitter.com/sunkcosts slug

    Flawless. I love the side by side comparison of Orman to one of the most customer unfriendly cards in the industry. They belong in the same story.

  • http://www.joetaxpayer.com JoeTaxpayer

    Ok. Suze card sucks less than Russell’s. That’s the punchline, no?

  • http://www.creditsense.com/ CreditSense-CreditRecovery

    I would expect more from Russell. And JoeTaxpayer kinda nails it. Has anyone taken a look at the NetSpend prepaid card lately?

  • Heronva

    When a new competitor comes along they tend to always beat the originator in order to gain market share; however, I am sure the RushCard will eventually match the Orman’s prepaid card or he will be the next Blockbuster or Circuit City, lol. Anyway, thanks Nerd Wallet for always providing the skinny…