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There is no reason to use the Suze Orman prepaid debit card when free checking is still available.

While free checking is becoming a little rarer, it hasn't completely died yet. In fact, it's possible to find plenty of free checking opportunities, if you just look around a little bit. Because of this, there is absolutely no reason to shell out for a prepaid debit card.

The Rise of Prepaid Debit Cards

Prepaid debit cards are on the rise as alternatives to checking accounts for the “unbanked” and they are touted as great financial teaching tools for teenagers. While both of these things might be true, it doesn't mean that prepaid debit cards are best financial tools for the job.

Indeed, the “unbanked” might do well to consider credit unions and online banks that offer free checking options and easy to use debit cards that don't come with monthly fees. On top of that, I'm not sure why a prepaid debit card is a better financial teaching tool than a regular debit card attached to a regular checking. I had a joint checking account with my mom at the age of 12; there are banks that will issue a 16-year-old a debit card on a joint checking account. Decline the standard overdraft “protection” and your teen has a regular debit card that will be rejected at point of sale transactions when there aren't enough funds.

In spite of the fact that there are better options out there, prepaid debit cards are still rising in popularity. Fight back against the big banks and their fees! With a prepaid debit card that charges fees. Indeed, many prepaid debit cards have monthly fees, reload fees, check your balance fees, and other fees that make even an expensive checking account look cheap. I think prepaid debit cards are a bad idea to begin with, and the fact that celebrities plaster their faces all over them in an attempt to make money off those who can least afford to pay outrageous debit card fees only adds insult to injury.

But What About the Suze Orman Prepaid Debit Card?

Clearly, I've heard of Suze Orman. As a PF writer, I can scarcely avoid her. But I don't pay much attention to her (or to Dave Ramsey, or to other gurus). Mainly because, as MJ DeMarco points out in?The Millionaire Fastlane, most of the advice given is designed to help you maintain the status quo, and not actually get ahead. DeMarco lumps Suze Orman in that group, and, with the launch of the Approved Card, it's not hard to see why. While the Approved Card is less crappy than other prepaid cards, it still sucks. Kevin at Thousanaire pretty much sums up the Approved Card:

I understand the fee structure on this card is less than some other prepaid cards available, but?being better than horrendous doesn?t make you good; it just makes you better than horrendous.

Suze has been defending the card by saying that it's better than other cards, and that it will lead a revolution in getting credit bureaus to start considering other items when figuring out your credit-worthiness. However, I'm skeptical. As part of CardHub's evaluation of the Suze Orman debit card, her credit project has been lumped under “marketing fluff”:

It appears that this is just an anonymous information gathering program that allows TransUnion to determine whether prepaid card information should impact one?s credit score two years down the road. It therefore doesn?t do anything for cardholders.

On top of that, the access to TransUnion's score and report is a bit of an overstatement. You can get access to your TransUnion information for free using Credit Karma (and access to your Experian info using Quizzle or Credit Sesame). So, if you don't mind paying fees in an attempt to build your credit, you're actually better off using a secured credit card?– any prepaid debit card will do nothing to help you improve your credit history.

In a world where credit is increasingly important, being able to use alternative means of measuring creditworthiness is important, especially since many financially responsible people don't like using credit cards. With credit reports and scores being used for a variety of purposes not related to getting loans, your credit is important. However, information about your ability to pay utility bills on time, or make rent payments, is more important than how you use a prepaid debit card. Anyway, I don't think that Suze and her team a very good job of making sure consumers understand that the Approved Card does nothing to improve credit scores?right now. Touting the TransUnion connection, and saying you're sending information, is a nice marketing move, but it obscures the fact that this is not a credit product, and it's useless, right now, for those looking to improve their credit.

Bottom Line

I have never liked prepaid debit cards. I think that they are sub-par replacements for free checking, and the Suze Orman Approved Card is no exception. However, the fact that a popular personal expert is touting this card is troubling. People trust Suze to point them to the best personal finance options and, unfortunately, prepaid debit cards just don't cut it. There are much better products available, and it's too bad that Suze isn't using her influence to promote those products, rather than coming up with a prepaid debit card.