Financial planner, Suze Orman recently jumped into the prepaid debit card foray. Orman touts her Approved MasterCard as “better than cash” and “safer than cash”. Of course, anything with Orman’s name attached to it receives automatic tally marks in widely read consumer advocacy columns, but is this new prepaid MasterCard all that it’s cracked up to be?
What is a prepaid debit card?
Prepaid debit cards stand alone, unattached from traditional banks. Issuers do not require a credit or Chex Systems background authorization before granting users the benefits of a debit card bearing the Visa or MasterCard logo. Users choose to load pre-set amounts on to the card at custom intervals, and when the money is spent, the card balance goes to zero; just like a checking account debit card.
The card costs $3 to activate and tacks on a $3 a month maintenance fee, not unlike most other prepaid credit cards currently available. However, there are other fees that go along with the card.
• $1 if you pay or pre-load the card by check
• $2 for each paper statement (online statements are free)
• $2 per over-the counter cash withdrawal
• $2 per call to live customer service (one free call per month)
• $3 card replacement fee
Yet, these fees are substantially lower than most of the prepaid competition in the market.
Orman’s inaugural prepaid card looks resplendent in comparison to its competition right out of the gate, but the Approved MasterCard has yet another distinct advantage: a partnership with credit titan, Transunion. The card comes with several free perks: unlimited access to credit reports and scores from Transunion, credit monitoring and identity theft protection.
In addition to credit services, Orman’s prepaid card offers unlimited free use of all Allpoint ATMs across the country, eliminating pesky bank ATM fees suffered by traditional debit card users.
Transunion Partnership While much of the buzz and appeal for Orman’s Approved MasterCard comes from the partnership with Transunion, buying and using the card does not improve the customer’s credit. Data is collected based personal spending habits and sent to Transunion, but for research purposes only.
Compare and Contrast
For many consumers, a prepaid card is a sensible alternative to cash and, for $36 a year, the fees for Orman’s card are far from outrageous. However, for consumers interested in building or rebuilding their credit, this card does not fit the bill.
Secured cards come with similar annual fees to the prepaid Approved MasterCard and work under similar preloading principals, but have one crucial difference: the secured card does help the borrower build his credit history. Secured cards also come with fraud protection and are FDIC insured, whereas Orman’s card does not and is not. So while Orman’s card may be a suitable alternative to cash, it has a long way to go if the intent is to help buyers catch up with their credit.
Regardless, you should always research terms and alternatives before adding any piece of plastic in your wallet.