Financial Expert Suze Orman raised some eyebrows this week when she revealed her latest product: a prepaid debit card. Is it a good deal?
The approved card lets users load cash value on to it, then use the card at ATMs and retailers. There are similar products from American Express and Walmart. But experts say most prepaid cards, and Orman's in particular are too expensive.
"Prepaid debit cards in general are not bad deals, they are horrible deals. They are loaded with fees," said Credit Expert John Ulzheimer of SmartCredit.com
He suggests consumers who don't have a checking account or other account that offers a free debit card buy a Visa Gift Card instead of a prepaid debit card. "There are no fees to use it except when you first buy it for a few dollars," he said.
Consumer Reports said Orman's debit card is typical of most, not necessarily a horrible deal but not a great deal either.
Orman defends her Approved Card, saying it is designed to help the 70 million Americans who don't have traditional checking accounts or credit cards and may need help sticking to a budget.
She says for the first time, the credit reporting Agency TransUnion is studying the spending patterns of Consumers who use the Approved Card. Orman says that could lead to changes in the way credit scores are compiled that would be more favorable to consumers who prefer to use cash rather than credit. "This is the first prepaid card in history that will show information to TransUnion about debit card use," she said.
Orman is encouraging the other main credit reporting agencies, Equifax and Experian, to include responsible debit card use when compiling consumers' credit scores as well.