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The Approved Prepaid Debit Card: Suze Orman Falls Short

Banking, Prepaid Debit Cards

With the unveiling of her “Approved Card,” Suze Orman pens yet another harrowing chapter in the long, haunting chronicle of celebrity prepaid debit. Following in the footsteps of Kim Kardashian and Lil Wayne, Orman has discovered another way to leverage her fame to fatten her wallet. Unfortunately, introducing a prepaid debit card is not a victimless endeavor. It preys on the unbanked and financially illiterate, taking advantage of bad credit and limited options. We’ll tell you why the Approved Card is trash and what you should do instead.

Bleeding fees

We’ll admit the Approved Card is a substantial improvement over previous prepaid celebrity travesties. Lil Wayne’s Young Money Card is considerably more expensive, and the Kim Kardashian fiasco was such a debauchery it was terminated soon after inception. We rank Approved above competing celebrity-endorsed options, but it lags far behind certain no-gimmick cards like the Western Union MoneyWise.

Prepaid debit would be an okay checking alternative if it was free, but never does it come remotely close. These evil little buggers are so bloated with fees they can easily outstrip high-end credit cards in annual costs. Here’s a chart of the Approved Card’s 20 different fees.

Fee Cost
Card purchase fee $3.00 per card
Monthly maintenance fee $3.00 every month (waived first month)
Domestic  Allpoint ATM withdrawal fee $2.00
Domestic Non-Allpoint ATM withdrawal fee $2.00
Domestic ATM balance inquiry fee $1.00
Domestic ATM declined fee $1.00
International ATM withdrawal fee $2.00
International ATM balance inquiry fee $1.00
International ATM declined fee $1.00
Over-the-counter cash withdrawal fee $2.00
Live agent customer service call fee $2.00 (one free call per month)
Card replacement issuance fee $3.00
Express card delivery shipping fee $20.00
Paper statement fee $2.00
Bill payment fee for paper checks $1.00
Bill payment fee for expedited payments $9.95
Bill payment fee for check copies $20.00
Bill payment fee for check re-issue $15.00
Bill payment fee for payment inquiries $30.00
Bill payment fee for postal rejects $25.00

The bare minimum you could possibly pay for Orman’s Approved Card is $36 a year (she waives the $3 monthly fee in the first month, only to charge you a $3 purchase fee). That’s if you never require additional services, and if you only load money onto your card using direct deposit and bank transfer.

Adding money to the Approved Card

To add money to an Approved Card, you have 3 options.

1)   Direct deposit. This means that your paycheck goes directly onto the card. This is the simplest and least costly way to go about it, but many prepaid debit cards waive the monthly fee altogether if you direct-deposit your paycheck onto the card. All the Approved card does is waive its withdrawal fee for in-network ATMs.

2)   Bank account transfer. This means moving money from other accounts to the prepaid card. This option has us scratching our heads. If you have a checking account, chances are you’re eligible for a debit card. So if you already have a bank, why on earth would you want to pay $36 annually to maintain another no-rewards debit card? Bizarre.

3)   Add cash at retail locations. You can use MoneyGram or Western Union to deposit cash. This will cost $3.50-4.95 per transaction. If you use this option and make but one deposit a month, it bumps your minimum annual cost up to $81.

Prepaid debit does not help your credit score

Though we’re still a long way from sustainable prepaid debit, each celebrity card seems to get a little more reasonable. Orman’s $39 annual minimum (remember, you’ll probably pay way more than that) is comparable to some credit cards for bad credit. HOWEVER, the second biggest reason to avoid prepaid debit (after the insane fee charts) is they do NOT help you build credit. You’re not actually borrowing money, so prepaid cards do nothing to establish your creditworthiness. No matter how long you use the Approved Card, you’ll never qualify for anything better.

Yes, yes, Suze Orman’s working with TransUnion, a credit reporting agency, to analyze data on prepaid debit card use in the hopes that someday it will impact your credit score. Right now, TransUnion anonymously collects information on the Approved cardholders to see if their past behavior can predict whether or not they’re a credit risk. But for now (and the foreseeable future) debit cards won’t change your FICO score one bit.

Your credit score affects your eligibility for credit cards, home loans, car loans, apartment rentals, good insurance rates, reasonable interest rates and even some job opportunities. Prepaid debit cannot help you raise your credit score. Credit cards can. If you’re struggling to qualify for something with reasonable terms, check out the Orchard Bank credit card.

The Orchard Bank credit card is offered unsecured if you qualify and secured if you don’t have any other options. The unsecured version comes with a $59 annual fee ($29 the first year) and a one-time $39 processing fee. The secured card comes with a $35 annual fee and a $200 minimum deposit that will be returned to you when you eventually qualify for a better card and close your account. It’s not the world’s most appealing credit card, but it’s one of the best options for limited credit. And unlike the Approved Card, Orchard Bank reports to 3 major credit bureaus. Through responsible spending, you can build your credit, and it shouldn’t take long to qualify for a better card.

Alternatively, you can visit a local credit union. Because they are not-for-profit organizations owned by their members, they can offer low-cost checking accounts and credit cards for folks with less-than-perfect credit. Find one in your local area by using our credit union finder.

Money monster

It’s puzzling (and disturbing) that a supposed finance guru would advise her followers to embark on such a foolhardy journey. Orman knows cardholders can easily accumulate over $100 in fees every year. She knows her card won’t help improve anyone’s FICO score. She knows the backlash and criticism incurred by similar celebrity money pits. And yet, she’s pushing through proudly. “I didn’t just approve this card. I created it,” she boasts. How long before the condemnations of the financial experts shame the Approved Card into submission? We’re expecting devastating critical repercussions, and if Orman wants to maintain her status as a financial authority, you can bet she’ll rethink her profit strategies.