Has Suze Orman grown tired of being a financial advisor and decided to become a financial player? One would think so with the announcement of the Suze Orman debit card that many in the financial world consider a poor deal.
Suze Orman’s Approved pre-paid card charges access fees of $3 per month, $2 per paper statement, and $2 per live agent customer call (one call per month is free) and ATM withdrawal fees. With the Approved card, fees are assessed when the customer loads the card ($3.50 to $4.95 since customers must rely on Money Gram or Western Union to transfer funds.) Electronic transfers and direct deposits are free, but consumers cannot post paper checks or cash onto the card.
Many in the financial world are wondering why Orman’s potential customers don’t just open a free checking account. Why indeed?
According to a survey by the FDIC, 25.6% of the population, 60 million adults, are either without a bank account or rely on “alternative financial services” like pre-paid debt cards, payroll cards, money orders, check cashing businesses and payday lenders. Households making less than $30,000 a year are 71% of the unbanked households.
Why don’t these households get a bank account? The simple answer is that many who earn less than $30,000 are turned down by banks because of bad credit. Many come from families who do not traditionally use banks because they don’t trust them. The reason given for not having a bank account from 37% of those surveyed was not having enough money to need a bank account. Other reasons given include “the minimum balance is too high” (12.9%) and “no reason to have an account” (12.4%).
This market has made Wal-Mart’s pre-paid debit card and check cashing services popular. It’s also the market Orman is targeting:
“The majority of people who have these cards are called the unbanked and the under banked…,” she said in an interview with GOOD. The 99 % movement, this card was developed for them, because this card… is a way for you to carry a little bank in your pocket with you… If you want to make a difference in your own life… I am telling you put your money on me.”
It seems Orman considers her card the answer to the consumers protesting bank’s outrageous fees while promoting a service that charges for customer service and statements, items normally considered the cost of doing business. Besides the monthly access fees and possible loading fees, customers are charged $2 to get cash, $1 to check a balance and yet another $1 if the card is declined by the ATM. In addition, as for the one free call per month to customer service per month, how many calls does it usually take to straighten out a problem? How many of the “unbanked” have the means to check their balance on line?
So how does Orman justify her card, which does not pay interest and does not promote financial planning or savings as a “better way”? The “Approved” card’s offers a way to establish credit through Orman’s agreement with Trans Union to collect customer’s usage information and build a good credit report. The cards also offers free Trans Union credit reports for a year and identify theft protection.
Having a means to build a credit rating is a good thing. Including pitfalls that threaten to trip up that attempt with so many fees is not.