Personal finance guru Suze Orman is launching a prepaid debit card that may be a game changer for the prepaid card industry.
Personal finance advisor, award-winning author and TV hostess Suze Orman has branded her image with a low fee prepaid debit card that has the lofty ambition of helping users build – or rebuild – their credit score.
Dubbed “The Approved” prepaid MasterCard, Orman’s card has a $3 price tag to acquire and then costs a $3 monthly fee after that as long as users load $20 onto the card each month, making it both affordable and straightforward as opposed to some of the other co-branded celebrity prepaid debit card attempts. Users only run the risk of being subjected to additional fees if they use an out-of-network ATM when making a cash withdrawal. “The Approved” card will also avail users of free services such as identity theft monitoring, free credit TransUnion credit reports and credit monitoring.
The prepaid debit card market promises to be hot in 2012, as more and more consumer turn to prepaid cards as an effective budgeting and debt management tool. Prepaid cards have also been particularly helpful to those consumers who chose to avoid banks altogether, as they can be used to collect paychecks via enrollment in direct deposit.
However, because debit card activity, on both prepaid and traditional cards, doesn’t get reported to the big credit scoring bureaus, they do nothing to help cardholder obtain an auto loan, a mortgage or a traditional credit card. Individual credit scores are calculated based upon data that is related to borrowing.
But Orman hopes to change that. She is currently working with the credit reporting company TransUnion to develop a new way of credit scoring for “The Approved” prepaid MasterCard users that is based upon their shopping habits and how they spend. TransUnion will gather spending data for a time span of 18 to 24 months, after which it will use the information to attempt to develop a workable formula that will predict whether or not the user represents a good risk for lenders.
“Wouldn’t it be fabulous if, for the first time in history, people are literally rewarded for spending cash, versus penalized, in my opinion, for doing so?” said Orman, as reported by the Associated Press.
Right now, it is estimated that approximately 60 million Americans conduct some or all of their personal business using cash or cash alternatives such as prepaid cards. Consumers loaded roughly $70.7 billion onto prepaid cards throughout the year 2011 according to the Mercator Advisory Group.
