Suze Orman Kim Kardashian-style?

[vanillabean]

Suze or not, look closely at celebrities' prepaid cards

Suze Orman debit card raises many doubts

Suze Orman card: Rip-off or righteous?

"In the press conference launching the card, Orman acknowledged that the even though she will be sharing consumer's purchase data with one of the major credit bureaus -- TransUnion -- TransUnion will not be using the data to help Approved card customers build a credit file. They may someday. But they're not now and there is not even a promise to do so in the future."

"Who does this card benefit? People who don't want a secured credit card, cannot open a regular checking account because they've got such bad credit that neither bank nor credit union will accept them, and who are so poor that they cannot deposit $1,000 a month on a GreenDot card. It's only at the intersection of no credit/bad credit and poor that the Approved card is the best deal."

[pizzadude]

I read in another article that TU needed something like 10 million subscribers in order to do a pilot with her card.....IMO that's not likely to happen...

[lithium78]

The only people who have a "need" for the Approved Card are people who are very poor and have run afoul of Chexsystems so they can't get a checking account.  I suggested the Approved Card to someone I know just for that reason after seeing him get ripped off even more by using a Rush Card.

[Anonymous]

I just read this in Bloomberg Businessweek.

http://www.businessweek.com/magazine/suze-orman-debitcard-dealer-01182012_page_2.html

To be fair, Orman's target market is not the same as Kardashian's (Orman's market wants to be more financially literate). The real "danger" is Orman wants to "change the game" in that she wants to change how FICO scores dominate the personal credit ratings industry.

"Orman says some of her critics want to derail what she calls the most important part of the enterprise, an attempt to change how FICO credit scores are calculated. Currently, credit scores are based mainly on debts like credit cards, mortgages, and car loans. That makes it hard for people who don’t borrow money to establish a credit history. Orman has persuaded the credit bureau TransUnion to use data from her prepaid card to study whether debit purchases can be an indicator of creditworthiness. Since lenders, employers, and even landlords often check FICO scores, being able to establish a credit history with a debit card could be a boon for people who don’t have loans or credit cards.

That prospect may be years away. The two other large credit bureaus, Equifax and Experian, aren’t on board. The study will take 18 to 24 months—if there are enough data to make the analysis robust. “If the card doesn’t scale or the number of transactions don’t scale, it’s not going to do anything,” says Edited to remove a full name, a senior analyst at Aite Group, which advises prepaid-card issuers. Even so, the idea of bucking the credit-card and credit-scoring industries clearly appeals to Orman’s fans. After she explains the FICO effort at the book signing, a man shouts out, “How can we help you?” Orman’s answer: Get my card."

[vanillabean]

Thanks for the pointers. They offer great insight into the matter.

I have read that of the ~8000 credit unions in the USA, ~50% issue their own credit card programs. If the 70 million people in USA that presently have neither a checking account nor a credit card were to apply at such credit unions, how many would be accepted, do you think? Would Suze Orman's efforts be better served by going in such a direction?

[Revelate]

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@Anonymous-own-fico wrote:

Thanks for the pointers. They offer great insight into the matter.

I have read that of the ~8000 credit unions in the USA, ~50% issue their own credit card programs. If the 70 million people in USA that presently have neither a checking account nor a credit card were to apply at such credit unions, how many would be accepted, do you think? Would Suze Orman's efforts be better served by going in such a direction?

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Where are you getting your numbers from?

I thought it was much lower than the numbers you posted, and my GoogleFu found the following study:

http://www.economicinclusion.gov/key_findings.html

Maybe the underbanked category meets close to your 70M (give or take 4-5%), but completely unbanked is well less than that number.  That said, I thought Orman's debit card had zero chance, but maybe it can get 10M subscribers on those figures.

[vanillabean]

Revelate, thanks for clearing up the numbers. It would appear I mistook an "or" for an "and".

"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."

[MattH]

Does it have a picture of Suze's toothy smile?

I do think she is being a tad disingenuous when she says it can be a good deal "if you use it like I tell you to."  First of all, looking at all those gotcha fees in the fine print it seems clear that company expects to make nearly all their profits from people who don't use it like Suze tells them to.  Second, anybody who has been carefully following the standard advice handed out by Suze and many others is likely to have access to credit.  So the only people who might benefit from this card are people who (1) have not been following her advice but who (2) suddenly start following her advice upon getting her card.  Isn't the fundamental assumption behind FICO and all similar scoring systems that deep behavioral change (1) is rare and (2) almost never happens quickly?

One guy whose name I am sure will never appear on any card: Dave Ramsey.  I don't agree with everything he says, but I am sure what he says in his books and media appearances is exactly what he honestly believes.

My personal take on credit is, it's sort of like alcohol.  Medical data seem to show there are health benefits from moderate drinking, but for some people who cannot control their drinking the best option is total abstinence.  Similarly, I think moderate use of credit can be OK, but on the evidence there are lots of people who would be better off going the DR route of completely avoiding credit.

[Anonymous]

A debit card should never be allowed to count for your FICO score. A credit score basically rates your ability to pay back borrowed money. That is the keyword, borrowed. Using a debit card you are not borrowing any money so it shouldnt be allowed to count.Thats what I think at least.

[marty56]

Over the years I have heard Suze say some completely wrong things in terms of FICO scoring.  I like Matt's analogy to alchohol and to continue it I would say this card is like  MADD comming out with a lite beer with tons of warnings on the can about drinking responsibly.  I was suprised that she would come out with this card since the Kardashian card died a painful death.