Beating Broke

Personal Finance from the Broke Perspective

Suze Orman Releases Prepaid Card. Wait, What?

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Suze Orman, one of the most well known personal finance gurus in the media, announced a few days ago that she had created, and was releasing, a new prepaid debit card.  Prepaid debit cards, if you’re not familiar with them, are cards, like credit cards, where you prepay and then can only use the card for amounts up to what you’ve prepaid.  In most cases, they are marketed towards people who are unable to get credit cards because of bad credit.

Phil, from PT Money, blasted Suze for the card, on his site and on twitter.  I can’t say that I entirely disagree with him.  His problem with the card, and mine, is that prepaid cards should be a last resort for people who are unable to get a bank or Credit Union account that has a debit card attached to it.  What Suze is doing with this card, however, is pushing it to the general public who really have no use for it, and, by using it instead of a debit card from their bank or CU, are going to be lining the pockets of Bancorp (the bank behind the card) and Suze.  That’s shady, when you are claiming to be “America’s Most Trusted Personal Finance Expert”.  If she is an expert, she should know better. And, I think she does.  Which is why, instead of responding to PT (and others) on Twitter with a factual defense of the card, she had this to say:

Suze Orman Calls PT Money an Idiot
Suze Orman Calls PT Money an Idiot

Terrible way to take criticism, Suze.  To some degree, I discount her response because of the “sassy” way that she responds to questions and such on her shows, but I think she crossed the line here.  It’s one thing to tell the guy who calls in and asks if he should buy a new car when he’s 500k in debt an idiot, but another thing altogether when you’re calling a guy an idiot simply because he thinks your new prepaid card is a bad product.

Is the card a bad product? To Suze’s credit, unlike some prepaid cards that have had celebrity endorsers, this one has plenty of good things going for it.  It includes a credit watch program, and a free credit report with credit score.  It’s got a program to allow you to put money into a separate account for an emergency fund, free bill pay, and the ability to transfer money from one cardholder to another.

But, my Credit Union has all those things.  A $3/month fee on the card isn’t the worst of the cards, but it’s still a fee.  $36 a year to have access to your own money via a debit card?  Come on.  Again, my Credit Union does that, and they do it for free.  Yes, there are some who are unable to get a bank account.  And for those people, if you absolutely need to have access to a Visa/Mastercard card, then go for it.  But, despite what Suze is claiming, don’t expect it to improve your credit score.

There is no way that any of the credit agencies are going to take your activity on a prepaid card into account.  They’ve never taken your cash spending habits into account, and a prepaid card is no different than spending cash.  Would it be nice?  Absolutely.  Many of us who make most of our transactions on debit cards or with cash would agree.  But, it isn’t going to happen.  Your cash spending has nothing to do with your credit, so why would a credit score take that into account?

I just don’t see enough difference between this, and other similar cards to say that Suze went out on a limb here and created a product that is going to change the industry.  As a prepaid card, it’s decent.  There are better.  In the end, it’s still just a prepaid card that should be used as a last option when you can’t/won’t get a bank or credit union account with a debit card.

Read what some other Personal Finance Bloggers are saying:

Suze Orman’s “Approved Card” gets Denied; Thinks PF Bloggers are Idiots

Suze Orman’s new prepaid debit card: The Approved Card

My two cents on Suze Orman and her prepaid card

Young, Gullible, and Broke: Suze Orman’s debit card FAIL

Suze Orman’s prepaid debit card scam

Suze Orman’s Card is Not Approved by Me

Suze Orman’s Approved Prepaid Debit card is Bad for Consumers

Suze Orman Shows True Colors with Her Approved Prepaid Debit Card

And that’s just a smattering of the posts on the subject.  I have yet to come across one that is entirely positive about the card. What do you think? Do you think that Suze did a good thing here, or is it just another way to milk some money out of her followers?

Have a Holiday Spending Plan: Don’t Dread January

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Its beginning to feel a lot like christmasHoliday shopping is in full swing now, and you may be feeling the financial pressure.  Shane recently quit his job and is working on a tight holiday budget.  My husband and I are in the midst of being gazelle intense, so we don’t have much extra money for gifts.  Yet even though we don’t have much money to spend this holiday season, I feel great about what we are giving because we are not overspending.  We can truly afford what we are giving.  Instead of overspending, we are empowering ourselves by spending exactly what we are able to spend.  Follow these tips to rein in your holiday purchases this season:

-Freeze the credit cards.

Literally.  Put them in water and freeze them.  Better yet, put them in peanut butter as we did.  Vow not to use your credit cards this month.  There is nothing worse than opening your credit card statement and staring at the large number you now owe.  The presents have been opened, the holiday is over, but you still owe for the holidays.  If, instead, you put the credit cards away, you have nothing to dread come January.

 

 

-Set a budget and fund it with cash.

Determine exactly how much you have to spend and withdraw that money from your bank account.  Pay for every purchase with cash.  Feel the pain as you part from the cash.  Acknowledge what you are spending, and feel empowered that you are sticking to your budget.
If you want to shop online, get a debit card.  Just avoid using credit cards.

-Shop the bargains

There will be plenty of deals to come this holiday season.  Stay focused on the deals and only buy items you can get on sale.  Take advantage of buy one get one free sales such as buy one toy of a certain brand, get the second toy from the same brand free.

-Buy sets

For children, especially young children, buy toys that come in sets such as a baby doll with a stroller and a high chair.  Take those out of the package and break them into three different presents for the price you paid for the bundled gift.

-Look in unconventional locations

My children get presents from Santa and from me and my husband.  Since they were little, the toys that get from us are often gently used.  I shop garage sales throughout the summer and hide gifts away.  This year my three year old will get a new in the box baby doll that I picked up at a garage sale for $3.  My son will get a wooden box with five different games in it that I found at a garage sale for $5.

Obviously you may not have time to go to (or even find) garage sales now, but you can shop children’s resale stores for quality toys at a steep discount.

They say ‘tis better to give than to receive, and that is true more so when what you give is what you can afford.  Why not enjoy watching your family open their presents this Christmas without worrying where the money will come to pay for everything in January.  It is possible.  Beating Broke and I are both proof of that.

photo credit: aussiegall

Back to a Cash Economy?

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With the recent increase in new fees at banks, and the backlash it has caused, people are starting to determine what the alternatives are.  At the moment, there are still banks and credit unions that are maintaining their current fee structure without adding anything new.  Many of those are also maintaining their “free” accounts.  But, if the Durbin Amendment remains, it may be only a matter of time before they buckle under the costs and start removing “free” accounts and adding fees.

What then?  It that happens, we might see a financial world where all debit cards have a monthly fee.  We might see more annual fees on credit cards, and higher interest on credit cards.  We might see more and more checking and savings accounts having a minimum deposit amount and/or a monthly fee.

Use Cash OnlyAs a card-carrying member of the NGPAF (Not Gonna Pay Any Fees) club, that might just make me decide that I don’t want to use any of their services anymore.  My depository institution might just have to become the coffee can in my backyard.  Seriously, though.  If all of those services become services with fees, we might see a pretty drastic increase in the usage of cash again.  Many of us don’t use cash all that much.  I know I don’t.

And what happens if we return to a cash economy?  The banks get even less transaction fees.  Their income drops because of it.  And we all see what happens when their bottom line is threatened.  More fees.  It could send the banking industry into a never ending spiral of more and more fees until the only people who still use banks are the ones who don’t feel comfortable keeping thousands of dollars in a coffee can in the backyard.

Luckily for me, I belong to a credit union that isn’t likely to add any additional fees anytime soon.  What about you?  Do you belong to a Credit Union or Bank that hasn’t added fees recently?  What if they did?  How long do you think it will be before we have to choose to either pay fees or carry cash?

photo credit: flattop341