I had a memorable conversation on Monday with Suze Orman and Kim Bishop, the face and president respectively of the new Approved Card prepaid debit card. I had quite a few questions for them, and they did answer them, even if at times I did feel as though we were speaking at cross purposes.
I started off by asking Orman about an exchange she had last week with Marketplace Money’s Tess Vigeland.
Vigeland: CardHub.com did an analysis of your card versus the Green Dot card as well as the Amex card. And the one knock it did have is that there are so many different fees on your card — 20 versus eight for the Green Dot and only one fee for the Amex card.
Orman: Oh please, girl friend. Don’t tell me that you are that naive. There is no way Amex has just one fee. There is no way Green Dot has just four or five fees. The person that did that article doesn’t even know how to evaluate cards, let alone be good enough to give a determination on it. The reason that they were able to see all the fees that we could potentially charge, if you don’t use the card the way that we tell you, is because by law, you have to have them. And the only difference is we’re showing everybody the fees, we’re being transparent! All those other cards, you do your homework. You try to find their fees, you try to find out how much it’s really gonna cost you, you’re not gonna be able to, because they are hidden deep deep into the site. Are you kidding me? He was an idiot!
It’s worth listening to that answer, rather than just reading it: she spits it out. There is. No. Way. Amex. Has. Just. One. Fee.
Except, there is a way that Amex has just one fee. See for yourself. It’s a reasonably big fee: $2 per ATM withdrawal, with no free ATMs. But it really is the only fee that Amex has — you can delve as deep into the terms and conditions as you like, and you’re not going to find another one.
(There’s one other possible cost associated with the Amex card: if you have cash that you want to put onto your card, and for some reason you can’t deposit the cash into your bank account and transfer it over that way, then you’ll need to buy a MoneyPak, which costs $4.95. That’s the same as the Approved Card charges if you reload at Western Union, and it’s a bit more than the cost of reloading the Approved Card at MoneyGram. But Orman is very keen that you should never reload the card that way, and I don’t think Amex expects many people to reload with MoneyPaks, either.)
Now Orman did make a good point, which is that many of the fees on the Approved Card are for services which Amex doesn’t even offer. The Approved Card is designed to be a credible replacement for a checking account, and so for instance there are fees for things like re-issuing a check when you’re trying to pay a bill for the second time. You can’t do that with the Amex card, which doesn’t offer bill pay at all.
If you’re considering the Approved Card as a checking-account alternative, then, you should be comparing its fees to checking-account fees, rather than to the Amex card’s fees. But, if you already have a checking account and you want to get a prepaid debit card for some reason (maybe you want to use one for your kids’ allowance, for example, so that you can track where they’re spending their money), then it does make sense to compare the Approved Card to the Amex card.
Orman gave an Approved Card to her elderly mother; every time her mother uses it, Orman gets a text message saying where it was used and how much was spent. It’s a useful service — but the fact is that the Amex card also has email alerts, and doesn’t have a monthly charge.
So is the Amex card better than the Approved Card? I’m not sure about that. For one thing, it’s only accepted where American Express cards are accepted, which is a smaller universe of places than the Approved Card, which is a MasterCard. And you’re almost certainly better off with an Approved Card if you’re going to want to get cash out on it. On the other hand, the Approved Card does charge for a bunch of things that you get for free with the Amex card. There’s the fee for being declined at an ATM, for instance, or the fee for talking to a human being on the phone more than once a month. And the Amex card’s freebies (purchase protection, roadside assist, global assist emergency medical help, access to concert presales) are better than the offers on the Approved Card.
The Amex card even has its own, slightly more useful, version of the credit reporting which Orman’s so keen on with the Approved Card. With Orman’s card, your spending activity gets reported to TransUnion, which then will look at two years’ worth of aggregate data, and start thinking about whether there are useful correlations it can find between that data, on the one hand, and your demonstrated creditworthiness, on the other. No one’s promising anything, and nothing’s going to happen in any case until 2014 at the earliest.
With the Amex card, by contrast, the Make Your Move program will graduate you from a prepaid debit card to a fully-fledged charge card in as little as six months. Again, there aren’t any promises. But if you want a credit card and don’t currently qualify for one, the Amex prepaid card is likely to be more helpful to you than the Approved Card.
All of which is a very long way of saying that Orman’s animus towards the Amex card is decidedly misplaced. If you’re in the market for what the Amex card is offering, then it’s a competitive, attractively-priced offering. Orman’s card is not bad, and its fees are not a rip-off. But she has a dog in this fight now, and that means she’s no longer a reliable guide to the maze of personal-finance products out there. It used to be that when Suze Orman was rude about a product, that was because the product in question was a bad one. Now, when Suze Orman is rude about a product, it could just be because that product competes with her product.
And that’s, at heart, my beef with the way that Orman is now talking about checking accounts. She treats them all with extreme prejudice — and I hardly blame her for doing so. Much of the time, they really are evil things, filled with hidden pitfalls for the unaware. But now they’re competitors, too. Both Orman and Bishop were quite open about saying that they would be perfectly happy if someone fed up with checking-account fees closed down that account entirely and moved their life onto the Approved Card.
Orman, for instance, promised that the fees on her card would only ever go down, not up, while saying that thanks to the ever-deteriorating housing market, checking-account fees are going to rise. “The banks are going to be in big trouble,” she told me. “If they get into big trouble, which I know they’re already in, you’re going to see fees on these accounts and you’re never going to know what hit you.”
Orman even tried to persuade me that if you used a checking account to pay your bills, and you paid those bills by writing seven or eight paper checks per month and mailing them in with a first-class stamp, then the cost of postage would be higher than the monthly fee on the Approved Card. That seemed silly to me: if you can set up electronic bill pay on the Approved Card, then you can set it up with your checking account’s online banking, too. But Orman was adamant: you could do that if you wanted, but she wouldn’t advise it. Because even if there aren’t any fees for online bill pay now, your bank will surely start charging those kind of fees sooner or later. “You are going to see fees on every one of these checking accounts that are currently free,” said Orman — which, of course, if true, is a reason to just move over to using an Approved Card instead.
Just like with the Amex card, however, Orman isn’t credible here any more. I’m not saying she’s wrong, but she’s undoubtedly conflicted. And that means she’s no longer a reliable guide to things like the pros and cons of maintaining a checking account — one of the most basic financial decisions that everybody has to make, and one where up until now I would absolutely trust her advice.
Of course, I have my own opinions on financial matters as well. And some things are just completely laughable. Like, for instance, the idea that anybody, ever, should spend $63 per year for an investment newsletter with buy and sell portfolio recommendations which are designed to beat the market. But, that’s exactly what Orman is selling. And, she told me, “that newsletter is fabulous”, adding that it “has been beating the market by a lot”, and that it was “rated number one” by someone or other, and — I have to admit this is where she rendered me utterly speechless — “we issued a buy for an ETF for gold, we are up 5% in that ETF in a week and a half. So you have to look at the returns and judge it on the returns.”
Remember, this is a newsletter giving investment advice for people’s retirement accounts. And here’s Suze, bragging about the 10-day return on a gold ETF? “If you want to dispense information that you just buy and hold,” Orman told me, “I wouldn’t want to see your track record.”
Well, I’ll happily ignore Orman’s advice on this front, as well as the advice in her Money Navigator newsletter, and I’m going to stick to my buy-and-hold strategy instead, even though Orman’s telling me that “index funds are no longer going to be the way to do things, you need to buy ETFs with high dividend yields”.
All of which is sad — because the Approved Card, as I said originally, really is as good as prepaid debit cards get, and has a bunch of features that I can only dream will be replicated elsewhere.
There’s free access to your credit report, along with a free credit monitoring service, just for starters. I’m not convinced that these things are worth paying for, but if you get them for free, you can’t really complain. There’s a huge nationwide network of free ATMs, with an easy-to-use tool for finding them. There are discounts from various merchants. There’s a return tracker: when you return an item to the store and they say it’ll take a certain number of days for the money to be credited to your account, you can enter that into the system and it will tell you when the refund arrives, or warn you if it hasn’t arrived after two weeks. And there’s a wonderful service which texts or emails you your balance at 8am every morning, so that you can start the day knowing exactly how much money you have on your card, without even needing to check.
Most importantly, there’s a user-friendly interface which is designed to help you save, rather than spend, and to avoid fees, rather than incur them. Orman is absolutely genuine in her desire that everybody with this card pay no more than the $3 monthly fee — the phone system and the alerts system and everything else are set up to actively discourage the kind of behavior which would incur any extra fees on top of that.
But the point is that I need to make my own determination, here, about the virtues of the Approved Card. On close examination, and after spending an hour on the phone with Orman and Bishop, I’ve come to the conclusion that it’s a very good product. (I also have to take Orman’s word for some of this, since things like the Approved Discounts and the return tracker haven’t made it onto the Approved Card website yet.)
But what I can’t do is simply say “you can trust Suze Orman”. You can’t trust Orman on the subject of her competitors — which, now, includes every checking account in the country. You can’t trust Orman on investment advice. And I don’t trust Orman either on the value of credit scores and credit monitoring — a service she sells through MiFico for $50 per year.
Orman’s heart is in the right place: none of her products are really bad. If you sign up for a one-month free trial of her newsletter, you don’t need to provide a credit card number: all you get is the newsletter for one month. If you then want to subscribe, you need to subscribe. That’s a sign of an honest merchant: Orman isn’t looking to rip anybody off.
But if you want an impartial judge of whether to have a checking account or a prepaid debit card, Orman is certainly not the person to ask: she’s a full-fledged financial-services provider, now. Who will watch the watchdog? I think we need a new guru.