Credit Unions Online

Credit Unions May Say "No Thanks" To Suze Orman Prepaid Debit Card

Credit Unions May Say "No Thanks" To Suze Orman Prepaid Debit Card By Gina Ragusa
Published January 23, 2012
Credit Unions Online
Share This
Follow Us

Several credit union trade publications have sounded the alarm that the Suze Orman prepaid debit card program, “Approved,” could cost the industry a bevy of bucks.

Orman touts her card, currently in the pilot program stages, as a tool that allows those with poor credit to build or rebuild their score. She told NPR host Audie Cornish, “The main purpose of this card is for the first time in history, a prepaid card - a debit card - is going to be sharing information with TransUnion, a major credit bureau, so that over the next 18 to 24 months a major credit bureau - and I hope the other two join me - will be able to evaluate this information and determine if activity on a debit card can create a FICO score, or a credit score for you.”

Numerous industry experts point out that simply sharing debit card information with a credit bureau does nothing for the consumer in terms of credit building and the development of healthy financial habits.

Ondine Irving, founder of Card Analysis Solutions said, “The Suze Orman prepaid card does nothing to establish a full service banking relationship.  And as much as people may have hatred for banks and less for credit unions, the fact remains lending is a part of the American way of life. Credit unions establish and foster lifelong relationships with members to service all of their financial services needs- and a prepaid card is a stop gap measure and in no way will ever replace full service relationships.”

CUNA spokesperson Pat Keefe says that while CUNA hasn’t taken a position on Suze Orman’s card, he still believes that tapping into the member’s own credit union is safer and the best way to nurture financial growth.

“We do believe that credit union issued check cards (or debit cards) are a better deal for most credit union members, and consumers in general,” Keefe says.  “Very few credit unions charge any sort of monthly fee for their check/debit cards, which is more common with prepaid cards (e.g., the $36 the card in question charges). And, of course, share draft accounts at nearly all credit unions – which are typically tied to check/debit cards – are federally insured, unlike prepaid cards.”

What About Fees?

Fees with “Approved” are another point of contention that completely goes against credit union philosophy.  Compared to other “celebrity-backed” prepaid cards, Orman’s is lighter on fees, but still higher than what a member would find at their credit union:

  • $3 to purchase the card
  • $3 monthly maintenance fee (waived for the first month)
  • $2 per withdrawal
  • $1 for a balance inquiry
  • $1 for a declined transaction
  • $2 over the counter cash withdrawal
  • $2 to contact a live person for customer service (one free call per calendar month)
  • $2 to receive a paper statement

Although Orman’s card is touted as “ideal for the unbanked (code for those with poor credit),” in addition to standard free checking, numerous credit unions offer second chance checking accounts.  Second chance accounts are designed specifically as a wealth building tool for the unbanked and are tied to a free debit card for considerably lower (or no) fees.

A quick scan of the myriad of credit unions offering second chance type products run from no monthly fee to about $8.95 on the higher end. Accountholders have use of a free debit card with fee free transactions, free paper statements, free account inquiry options and the member can talk to a member service rep, call center professional or teller for free any time he/she desires.  Compared to the possible $85 plus a year from the Orman card and the member’s choice should be pretty easy.

“Approved” May Fizzle With Credit Unions

Wendy Meola, Director Marketing at Community Resource Federal Credit Union ($64 million, Latham, New York) said that her credit union conducted in-depth analysis of prepaid cards in 2009 and didn’t feel the love with the program in general.

“We don't offer the reloadable VISA card right now, although we looked into it,” she says.  “(After comparing several programs) in the end, we decided to hold off.  Community Resource tries to offer programs with low fees. In the end, none of the programs we looked at met our criteria. We didn't want to offer one if we couldn't compete with the very affordable program offered by AAA.  It has a one-time fee and then a fee for ATM withdrawals - but fees were low compared to others we surveyed.”

Meola echoes what other credit unions are feeling--they can offer a program far stronger to those who may be struggling with cash flow and credit, plus a credit union program can nurture financial stability, unlike the “Approved” card.

Swami Seetharaman, SVP/Chief Marketing Officer at Credit Union One ($740 million, Ferndale, Michigan) says that what Orman is offering is much less attractive than what his credit union offers members.

“For example, we offer our members a checking account with no monthly maintenance fee if the member has direct deposit  (no minimum required),” he explains.  “If the member does not have direct deposit, the member can still avoid the low monthly fee of $6 by a combination of debit card purchases or online bill payments.”

“The member has access to 28,000 plus surcharge free CO-OP ATMs, 4400 shared branching locations, online bill pay and a host of other financial services,” Seetharaman continues.  “To cap it all, we offer a Platinum Debit Card at no cost to members with a checking account that has great benefits like extended warranty, price protection, purchase assurance and zero liability.  While ID Theft Protection and access to credit reports are good features, most consumers can get free credit report from the three credit bureaus once a year.”

Space Coast Credit Union ($3 billion, Melbourne, Florida) is sticking with free credit union products instead of going the prepaid route. “We have kept an eye on the prepaid debit product, but we have focused on offering debit cards as part of our checking account product,” says Meredith A. Gibson, SVP/Marketing.   

“There is no doubt that the association with Suze Orman will generate more interest than a typical debit card offering might receive, but the consumer will have to decide if there is a benefit to the card that would outweigh the benefits of a card provided through a checking account,” Gibson adds.   

While some publications are voicing concerns that Orman’s card could cost credit unions and the member a pretty penny, credit unions appear to be one step ahead of the offer and are giving it lukewarm vibes.

“I do not see this product having any notable impact on credit union industry, but can be an alternative for consumers who can’t afford to maintain high balances that some banks require and do not have access to a credit union,” Seetharaman says.

Gibson sees “Approved” as being just, “Another product offering among many in the marketplace.  Competition is always good in that it ensures that providers must keep looking at their offerings to ensure that they are providing what customers value.  This is no different.”   

Find a credit union and choose from one of the hundreds of free products and services offered to members.

comments powered by Disqus
Previous Story:
Credit Unions Stay One Step Ahead of Internet Scams
Next Story:
U.S. Credit Unions May Soon Celebrate, "Every Day Is Bank Transfer Day"

Blog
Calculators

|   Home   |   Find a Credit Union   |   Blog   |   Holiday Closings   |   Top 100 Credit Unions   |   Calculators   |

Share This
Share Facebook Share Twitter Share Google Plus
Follow Us
Follow Facebook Follow Twitter Follow RSS Feed Follow email

Privacy Policy   About Us   © 1995-2014, All Rights Reserved.