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Dear Ken: I was watching TV the other day and saw that Suze Orman has a new credit card that anyone can get and it will raise your credit score. What do you know about it?
A: According to the Federal Reserve, prepaid cards such as the Suze Orman one are the fastest-growing payment method with more than $65 billion in transactions last year. One advantage of prepaid cards is they don?t allow you to get into debt because you can?t spend more than the amount you have on the card. This is also true with most debit cards.
Suze has shared a lot of common sense financial wisdom and she has sold a lot of books. However, I am reminded, ?If it seems too good to be true, it probably is.?
First, the card is not a credit card. It is a prepaid credit card, which means you put money on the card; there is no credit involved. Suze?s ?approved card? is an alternative for people who don?t have traditional checking accounts and access to debit cards.
The basics of the program are:
You make electronic transfers or pay cash to load money onto your card.
You use it like any regular credit card.
You will get an automatic text message after each purchase.
Most prepaid credit cards come with fees and the ?Suze card? is no exception. There is a $3 monthly charge just to have the card, and although there is no cost to reload the card with direct deposits, there is a fee of up to $4.95 to put cash on the card at certain locations. Also you might have ATM withdrawal fees of $2 or more. In addition, you get one free call to a customer service rep per month and after that the calls cost $2 each.
The claim of ?improving your credit score? might be a little premature. Currently, TransUnion credit bureau has agreed to conduct an 18- to 24-month study on the use of her card and will analyze the data assuming enough data can be gathered for meaningful analysis. In other words, she needs to get a bunch of these cards out in people?s hands to gather the data. Only then can TransUnion use the data from her prepaid card to study whether credit/debit purchases can be an indicator of creditworthiness. It should be noted that this is a test project and no guarantee that it will affect credit scores. TransUnion has not agreed to factoring debit cards into the credit scores, only to study it.
It should be noted that it is still your money on the card and no credit is given. You are paying a fee every month to use your money.
Remember this: Suze is a good businessperson. She claims to have invested $1 million in the venture, and I am sure she expects some financial gain on the deal. However, she does promise to video train you on how to keep your costs down by using her card?s website. She explains the fees, gives some purchase warnings and explains some of the program details.
Article source: http://www.sheboyganpress.com/article/20120318/SHE03/203180362/Ken-King-column-How-prepaid-credit-cards-work?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE%7Cs
Source: http://supercreditcards.info/2012/03/18/ken-king-column-how-prepaid-credit-cards-work/
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