Suze Orman recently launched a prepaid debit card called the Approved Card. Now, I’m not a big fan of prepaid cards in general and prefer debit cards instead, but this coming from Suze Orman, deserved another look.
I like Suze Orman. She does what a very few can do – break down complex financial topics so that the average man on the street can understand. Suze’s advice is quite sensible and her show is definitely worth watching.
This card, like most prepaid cards, is geared towards students and people with little or no credit. With a prepaid card, you can’t get into debt. You can only spend what you prepay. Since this is endorsed by MasterCard, you can use this card where credit cards are accepted and since this is a prepaid card, no credit is issued, but you get fraud protection from MasterCard on your purchases.
To understand the nuances of signing for purchases as opposed to using a PIN, read my post: Should you sign for a debit card purchase or use your PIN?
This card does have some features not found in a normal prepaid card like free identity theft protection and free access to your credit score.
But is this card worth signing up for? Let’s find out!
The promotional page for this card lists 9 benefits of using this card. Let’s go over each one of those points. I’m going to compare the Approved card with a Debit card. I’ll use a debit card from Ally Bank since that’s the one I’m most familiar with.
1. Stay Debt Free
With the Approved Card (or any prepaid card) you can’t get into debt. If you don’t opt-in for overdraft protection with a debit card, you can’t get into debt either.
Both require funds to be available in your account before you can spend it. But since Ally Debit card is backed by a checking account, and since Ally pays interest on its checking account, you earn interest on your balance. With the Approved card you earn 0% interest.
2. Safer Than Cash
From the website: “If your Approved Card is lost or stolen, your money can be replaced under the MasterCard Zero Liability policy (conditions and exceptions apply—see The Approved Cardholder Agreement).”
If you are familiar with fraud liabilities, you’ll realize that there is nothing new here. Electronic Fund Transfers are governed by Federal Reserve’s Regulation E.
- If you report a lost or stolen card within two days, you are liable upto $50.
- If you report it after 2 days, you could be liable upto $500 and
- if it has been 60 days since your card was lost or stolen, you could lose your deposit.
I actually went through the cardholder agreement for the Approved card and it pretty much aligned with the above. But then how can they say ‘MasterCard Zero Liability policy’ if you can lose upto $50?
Here’s a little blurb from the fine print:
“This reduced liability does not apply if a PIN is used as the method of verification for a disputed transaction”.
If you use your PIN, you do not get the benefit of zero liability.
No, Suze Orman is not trying to be sneaky here! This is standard for any Debit or Prepaid card endorsed by either VISA or MasterCard. Please read my post on why this isn’t a surprise: If You Bank Online, You Need To Do This, Pronto!
When you sign for a purchase, your purchase is protected by your card provider, in this case MasterCard which on top of Federal Reserve’s Regulation E, also offers zero liability. When you use a pin, your purchase is protected by your bank which usually follows Federal Reserve’s Regulation E and hence no zero liability.
3. Free TransUnion Credit Scores, Reports & Monitoring
With the Approved card, you can check your credit score once you pay the monthly account maintenance fee of $3. With Ally’s debit card, there is no account maintenance fees, but Ally doesn’t provide credit scores either.
Now here’s the catch. TransUnion scores are not FICO scores. FICO score is the score that matters the most when you apply for a loan, not TransUnion Credit score.
Now, if you must, you can get this score for free! Here’s how:
Sign up for CreditKarma.
Credit Karma provides TransUnion credit score for fee. No credit card is required to sign up.
To find out how to get all three credit scores for free, read my post: How to get your credit scores from all three bureaus for free
4. Free Identity Theft Protection
With the Approved card you get free ID theft protection from TrustID. CreditKarma now offers free ID Theft protection from TransUnion if you opt-in. No fees for this service either.
5. Set Up An Emergency Fund
The Approved card has this unique feature where you can set aside money which will not be a part of your prepaid balance. Sort of like a savings account without earning you any interest! With Ally, you can create additional accounts for your emergency funds, all earning interest.
6. FDIC Insured
Your prepaid balance is federally insured upto $250,000. You automatically get this protection with any bank account, not just Ally’s.
7. The Credit Project
When you make use of a debit card, your purchase and payment history is not reported to credit bureaus. Which means, your exemplary payment history is not reflected in your credit reports or your credit scores.
So, does Suze’s Approved card report your transactions and history to credit agencies? Report yes, will it have an impact on your credit scores or reports? No!
When you opt-in, you are basically agreeing to send all your purchase and payment history to TransUnion! Companies will pay big money to get their hands on data like this. With the Approved card you are agreeing to give this data for free. How is this helping the card holder?
8. Low Monthly Fee
For the privilege of using your money, you’ll have to keep paying a fee of $3 every month. With Ally’s debit card, there is no fee, no minimum balance requirements either.
9. Teach Your Teens Financial Responsibility
You can order three add-on cards with your Approved card for a one-time fee of $3 per card! I can do this for free with Ally by creating joint accounts. I get the same benefits without the extra cost.
Other Fees With Suze Orman’s Approved Card
Card Purchase Fee: $3
Monthly Fee: $3
ATM Withdrawal Fee: $2
ATM Balance Inquiry Fee: $1
OTC Withdrawal: $2
Paper Statement Fee: $2 per statement
Bill Payment Fee, Paper Check: $1 per check
Customer Service: One per month free, $2 thereafter per call
The Same Services With Ally Bank
Card Purchase Fee: Free
Monthly Fee: $0
ATM Withdrawal Fee: $0
ATM Balance Inquiry Fee: $0
OTC Withdrawal: $0
Paper Statement Fee: $0 per statement
Bill Payment Fee, Paper Check: $0 per check
Customer Service: Free
Let’s calculate the true cost of Suze’s Approved card. Let’s say you make 2 ATM withdrawals and 2 bill payments a month using this card. That will be $9 in fees alone every month which works out to $108 a year!
One other feature touted in the site is free money transfer between Approved card holders. With Ally’s PopMoney service you can transfer money to anyone with an email id or a phone! Absolutely no fees.
For the people this card is targeted for, I think the Approved card is a very bad deal. As I’ve shown you in this post, all the benefits that this card provides can be had for free if you know how.
If this card were from the Kardashians, I understand. But coming from Suze Orman, I expected this to be revolutionary.
I was quite disappointed.