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Orman says if she finds people are incurring fees to put cash on the card, only to spend another $2 to get cash at an ATM, she will ask them to turn in their plastic. If you’re going to squander money that way, “just keep it in cash! You don’t need the damn card,” she tells the audience at the book signing.
Michael Collins, an assistant professor at the University of Wisconsin who studies the financial decision-making of low-income families, says people will eventually figure out the costs of any product. “The question is how long will it take” and how much in fees they will have racked up by then, he says. Collins adds that if Orman’s messages help people control their spending impulses, the card could be beneficial: “Anything that gets people to think harder about their financial security and take some responsibility is a good thing.”
Some personal finance bloggers have complained about the fees and charged that Orman is using her influence to bilk her fans. On Twitter, the Blog Finanza website said: “You are taking your authority figure to make a $$ from your audience. #DENIED”—echoing a catchphrase from Orman’s TV show. Others, such as MSNBC.com consumer finance columnist Herb Weisbaum, said many people would be better served by building their credit immediately with a secured credit card.
Orman dismisses the criticisms, saying the card reflects her understanding of people’s financial habits and needs. “I am the personal financial expert of the world,” she says. “I know what I am talking about.” Publicly, Orman lashed out on Twitter against the naysayers, calling them “small thinkers,” “idiots,” and “Suze haters.” After New York Times personal finance columnist Ron Lieber and others protested the harsh words, she issued a blanket apology: “For anyone I called an idiot, I too am sorry.”
Orman says some of her critics want to derail what she calls the most important part of the enterprise, an attempt to change how FICO credit scores are calculated. Currently, credit scores are based mainly on debts like credit cards, mortgages, and car loans. That makes it hard for people who don’t borrow money to establish a credit history. Orman has persuaded the credit bureau TransUnion to use data from her prepaid card to study whether debit purchases can be an indicator of creditworthiness. Since lenders, employers, and even landlords often check FICO scores, being able to establish a credit history with a debit card could be a boon for people who don’t have loans or credit cards.
That prospect may be years away. The two other large credit bureaus, Equifax and Experian, aren’t on board. The study will take 18 to 24 months—if there are enough data to make the analysis robust. “If the card doesn’t scale or the number of transactions don’t scale, it’s not going to do anything,” says Madeline K. Aufseeser, a senior analyst at Aite Group, which advises prepaid-card issuers. Even so, the idea of bucking the credit-card and credit-scoring industries clearly appeals to Orman’s fans. After she explains the FICO effort at the book signing, a man shouts out, “How can we help you?” Orman’s answer: Get my card.
The bottom line: While Orman’s debit card is meant to help people manage their money wisely, it puts her in a position of hawking a financial product to fans.
Weise is a reporter for Bloomberg Businessweek.
