It's official. Suze Orman is now in the game of selling financial products to consumers. This past week she launched her new card called "The Approved Card" which is supposed to be a low cost alternative to other pre-paid debit cards in the market place. While Suze gets on television to espouse the latest and greatest ways to make good decisions for your financial future, is a prepaid debit card something consumers need to make their financial picture better?
Let me remind you some important notes about Suze Orman. First and foremost that she isn't a licensed financial advisor. In fact, she hasn't had a securities license since May of 1991. There are tens of thousands of hard working licensed financial advisors out there trying to help clients every day. While she spends countless numbers of hours on television trying to tell consumers to stay away from 'high-priced' products and avoiding paying people fees and/or commissions, it's ironic that she now has a product on the shelf to make money directly from consumers. When seasoned financial professionals and financial bloggers challenged her on Twitter ( @SuzeOrmanShow ) this week about the launch of the new card, she dismissed some of these people by saying "too bad you chose to believe an idiot over me" and "read the reviews of legit reporters or ones that are smart enough to understand what I am doing." Suze . . . here's a news flash . . . I am legit, I am licensed, I carry six advanced designations, and have over 20 years hand to hand experience dealing with clients . . . so I will comment on this!
There are so many different types of cards, it's no wonder people are confused. When it comes to dealing with personal finance, the credit card, the debit card, and prepaid debit cards are three of the main cards people may use in their everyday life. Since close to 25% of the United States goes unbanked today, certainly there can be a place for the prepaid debit cards especially for people whose credit has been destroyed for things like filing bankruptcy or underwater real estate that was sold or foreclosed on over the past couple of years.
For most of us who can pay our bills, the strategy I still like the best to is to find an excellent point earning or cash back credit card to pay as many of your bills on that you can during a given month. This gives you the ability to float your cash and earn interest in your bank account for 30 to 45 days before you actually have to pay the credit card bill without incurring any finance charges. At the same time, you can build up a massive amount of points for flights, hotels, and gifts that can be used for the future. If you use a cash back card, then you can see some immediately benefit by getting more of your cash back in the bank. If you happen to use a debit card to make many of your monthly purchases, I am only a fan of these types of cards if you can attach a rewards program to the card. If not, then you are just giving away your cash today without gaining any ancillary benefit. This is especially true if you do have the ability to pay your bills.
Now, let's get to Suze. My understanding is that the best part of this card is that you get one free cut, color, and highlighting of your hair with your first purchase (just kidding). I couldn't resist making that comment because sometimes I think the dye goes straight to Suze's brain when she makes off handed comments on how professionals make their living in this business. We can't all make our money selling books to people and having no accountability around whether or not clients actually become successful.
Most prepaid debit cards are ladened with fees. Suze's prepaid debit card offers the ability to open a new card for $3 and carry a $3 monthly fee. The idea behind this card is that Suze is offering things like free identity theft protection and she is working hard with the credit scoring agencies to recognize these cards so people who can't establish credit or have bad credit scores can get some traction on establishing better credit. As I mentioned before, with roughly 25% of people in the U.S. unbanked today this could be a good alternative for people who simply cannot get a credit card or a banking relationship. The card will have the feature to accept direct deposit of your paycheck as well. Comparing the overall prepaid debit card market place, this card will be one of the better ones when it comes to cost to consumer and the benefits it can offer them. Wal-Mart Money and MasterCard do have good prepaid debit cards, but this card could have exceptional benefits if it can help you establish credit for your future. As far as the card goes, I'm a thumbs up on the card itself.
However, here's where this isn't good for consumers. The moment that the personal finance and consumer advocate entertainers like Suze Orman begin to sell products for personal gain and profit we have a problem. These entertainers who are unlicensed have the media power to influence thousands of people without clearly giving them all of the options that exist in the marketplace. That means there is really no separation of church and state and how will regulators make sure consumers get a fair deal. If this was a not for profit effort she was launching, it might make more sense to me. So here's my advice. . . . consumers beware when you listen to Suze on television now has she is in the product business and now will have other motives besides getting you to watch her show and buy her books.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc
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