Suzie Orman creates credit-reporting prepaid debit card

Prepaid debit cards are an expensive but very popular way for people with bad credit or a limited credit history to access common financial services. Suzie Orman, personal finance expert for CNBC, is throwing her hat into the controversial market of prepaid debit cards.

Orman’s prepaid card

Suzie Orman’s prepaid debit card, called the Approved Card, is supposed to present a more consumer-friendly version of a prepaid debit card. The Approved Card costs $3, the monthly fee is $3, and ATM withdrawals are $2 each. Checking the account balance or having a transaction declined costs $1. Out-of-network ATM transactions, point-of-sale transactions, paper statements and talking to customer service agents all cost $2. Some of these fees can be waived with direct deposit, but not all of them. Under average use, a card like this could cost between $10 and $50 per month.

A connection to credit

Traditionally, prepaid debit cards exist entirely outside the credit-reporting ecosystem. Prepaid debit cards are usually used by individuals who want to remain outside the credit reporting industry or have bad credit. However, Orman has worked out an arrangement with TransUnion to report on the transactions made with the Approved Card to be “considered for use in determining credit scores in the future.” This could make the Approved Card more attractive to individuals trying to rebuild their credit and less attractive to others who are trying to stay off the radar of credit reporting agencies.

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Prepaid debit as a controversial industry

Prepaid debit cards come with a heavy dose of controversy. The Kardashian Kard, which had fees up to $99.95, was recently pulled off the market under heavy scrutiny. Russell Simmon’s RushCard has also raised a significant amount of controversy, as individuals using the RushCard would regularly pay $1 per swipe to use the card.

Proponents of pre-paid cards claim that the cards represent an option for people who do not otherwise qualify for bank accounts or credit cards, and the fees are simply to justify the risk and expenses of operating the card networks. Opponents, however, point out that prepaid debit cards are often very expensive and charge customers fees to access money that is their own. Suzie Orman’s prepaid debit card could prove a controversial product.

Sources

CNN Money
New York Times
CBS News