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American Dream Card: Not a Scam, Just a Ripoff

Aug. 1, 2011
Credit Cards
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The American Dream card, a prepaid debit card, looks like a complete scam. It’s got all the features: bright, shiny website; smiling, newly rich families, an overabundance of exclamation points. We can say with some confidence that it’s no scam, but it is definitely not the best deal out there. What you see is what you get – and we don’t like what we see.

The American Dream card is a prepaid debit card, so you load up the card and then use it to pay at any terminal that takes credit or debit cards. What sets the American Dream apart is that instead of paying rewards, you are entered into a monthly sweepstakes. For every $1 you spend, up to $1,000 per transaction, you receive one lottery ticket. Each month, 12 winners are chosen to receive up to $25,000. The website says that the card is better than a lottery ticket: “There is no need to stand in line, buy tickets or pick numbers, simply use your credit card for everyday purchases and you could win!”

The house never loses

The thing about the lottery is that you aren’t likely to make money. In fact, you’re almost guaranteed to lose money. Why should this lottery be any different? The payout for every lottery winner is at most $25,000, and each winner receives 0.5% of all the dollars spent during that month. So let’s assume that $25,000 is 0.5% of the money spent on the American Dream card this month. That means that all together, the cardholders spent $5 million that month. Let’s say you spend $500 that month. Your chances of winning are one-tenth of one percent. That means your “rewards” on your debit card, statistically, are 0.12%. That’s a pretty meager amount.

Want 15 times the payout of the American Dream card?

Prepaid debit cards are very well advertised: they tell you that there’s no credit check needed, no way to overspend, and no better option for people with bad credit. But they’re so often riddled with fees and ridiculous charges that they’re rarely a good bet. In 2009, a prepaid debit card came with fees around $200 a year. Compared to your chance of winning, the fees sound pretty terrible. Thankfully, there are better alternatives for those with bad credit – our list of the top secured credit cards can help you rebuild your score, and if you’re looking for a checking account, you can still easily find free checking options.