Prepaid Debit Cards Getting Wider Use

There seems to be a sudden proliferation of prepaid debit cards, so marketers have enlisted celebrity endorsements to set their cards apart.

You may have seen ads for cards offered by Russell Simmons, the Kardashian sisters and Lil Wayne. But the latest celebrity-endorsed card bears the name of Suze Orman, known for her books and TV programs about personal finance.

So, is her card any better than the other fee-laden prepaid cards? Cardhub.com recent conducted an evaluation. They compared it to the Green Dot and American Express prepaid cards, which an earlier analysis had identified as the best replacements for a checking account and for its financial literacy tools.

Low basic fee structure

“Orman’s Approved Card has a pretty low basic fee structure as long as you regularly deposit money onto the card and use one of the over 35,000 ATMs AllPoint has nationwide," said Card Hub founder and CEO Odysseas Papadimitriou, a former Capital One executive. "However, there’s a fee floor, so to speak, which means this card will always cost you something.”

The Green Dot Prepaid Card is free to use as a replacement checking account, whereas the Approved Card will cost $3.25 per month.

The Green Dot Card costs $5.95/mo. for the financial literacy tool, the Amex Prepaid Card costs $6.66/mo., and the Approved Card costs $3.25/mo., making it currently the best option for teaching young people how to manage their money.

Bad for Suze?

Whether Suze Orman's card is good for consumers may be open to debate but, so far, what appears pretty certain is that the card isn't doing much for Suze Orman's reputation among consumers.

An analysis of about 31,000 consumer comments, admittedly just a handful, on Facebook, Twitter and other social media finds that she was enjoying a positive net sentiment rating as high as 80% until December, when the card was announced and her rating fell to near-zero territory.

There's not much doubt about what caused the steep plunge in net sentiment. Nearly all of the "dislikes" named by consumers had to do with the prepaid card.

Identity theft protection

The Orman Card provides a service through TrustedID that monitors your personal information and alerts you about any suspicious activity. This is undoubtedly beneficial for consumers, Card Hub says.

“Consumers often worry about identity theft, and the TrustedID service not only helps safeguard one’s money, but it also offers some peace of mind," Papadimitriou said. "The Emergency Fund feature also makes budgeting a little easier and overspending a bit more difficult – good things when you consider the rate at which people are adding new credit card debt these days.”

What should be clear to consumers using any prepaid card is that there are always fees involved for using your own money. It's just a matter of how many fees and how high they are.

Alternatives to the alternative

Consumers considering a prepaid card as an alternative to a big bank checking account might first check into what's available from a small, community bank or credit union. Small community banks, which sometimes have a few branches in urban and suburban areas, usually charge fewer fees and some even still provide free checking.

"Virtual" banks, like PerkStreet, provide more services than a simple prepaid card. PerkStreet offers a free checking account, online bill-paying and other services normally associated with brick-and-mortar banks.

Credit unions are membership organizations and are non-profit in nature. While they have to earn enough to pay operating costs, they don't have to show a profit and therefore, they tend to have fewer and lower fees.

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Sentiment analysis powered by NetBase