Pre-paid cards are everywhere you go these days, but one from a respected financial guru has now bit the dust.
Let me first say that Suze Orman is a wonderful woman. I've had nothing but great interactions with her when I've seen her. And she gives great advice on CNBC.
But she decided several years ago to market products under her name, including an approved pre-paid MasterCard. The promotions she did surrounding the launch were great. My personal favorite was her saying, "I didn't just approve this card, I created it."
With great frustration, I went on air after the launch and explained that even though she's a nice lady, this card was garbage and you should not get one. At that time, it was one of many co-branded cards like the Kardashian Kard that were coming out. And they've all pretty much been ripoffs.
Why pre-paid cards are a ripoff
Prepaid cards have become ubiquitous. You see them when you go into a drug store, gas station, convenience store, discount store, you name it.
But the reality is pre-paid cards are a landmine. You deposit money on account that you get to use as if it were a credit card (but without consumer protections) or like an ATM card to withdraw money (but without the protections of an ATM card.)
If your card is lost or stolen, you often lose your money. And then there are the monthly fees -- the activity fees, the inactivity fees, the balance check fees, and on and on.
I'm happy Suze Orman is pulling the plug on her card. It's always a dicey thing when you're in the business of giving advice that you would attach your name to anything.
Better alternatives to pre-paid cards?
So if pre-paid cards stink, what should you look for as a superior choice if they appeal to you? I've got 2 suggestions.
First, there is an exception as an alternative to a traditional checking account that you may have heard me talk about in the past and that is the Bluebird card. It's a joint partnership between American Express and Walmart that is beloved by Consumer Reports and customers across the country.
But the best answer for most people is to have an account with a credit union. They have great product offerings and they're generally free to join. When you open an account at a credit union, you own the place. Because the goal at a credit union is to serve its customers, not to make profit for some remote shareholders like a big bank would do.
Of course, some credit unions get so big to where they forget their original mission and focus. But the ones that lose their purpose are the exception, not the rule. To find a credit union near you, visit FindaCreditUnion.com.
Visa steps up with new standard for pre-paid cards
Because of the public outcry over how much these things stink, Visa will mark pre-paid cards that meet a modicum of basic consumer-friendly practices by the end of the year. While Visa hasn't yet decided what designation or emblem to use, The New York Times reports these are the criteria cards must meet:
- Flat monthly fee for purchases and in-network ATM transactions
- No fees for cash-back when you're making a purchase
- No overdraft fees
- Must have an easy-to-understand disclosure of terms and fees
- Must have FDIC protection on your funds