Tess Vigeland: Personal finance guru Suze Orman debuted a new TV show this week. It’s called “Money Class” on Oprah Winfrey’s network. It’s kind of money makeovers on steroids with a studio audience. And, she introduced her own prepaid debit card. That card prompted quite a dust-up on Twitter this week after Orman called some personal finance bloggers “idiots” for questioning some of the card’s fees. She eventually issued a blanket apology.
We asked her to join us to talk about the card, and also answer some questions you posted for her on our Facebook page. Suze Orman, welcome back to the program.
Suze Orman: Aw, thanks. I’m happy to be here.
Vigeland: I wanna talk about your new pre-paid debit card that was announced this week. Why did you decide you wanted to get into this business?
Orman: As you know, there’s an entire group of people — the unbanked and the underbanked — that are growing, there are 70 million of them right now, that are literally using these prepaid debit cards. The fact of the matter is, if you look at the majority of the prepaid cards that are out there, they absolutely charge exorbitant fees. So I decided number one, that was absolutely ludicrous. That people should not have to pay large sums of money just to be abel to have the privilege of using a card. Next, I wanted to change the scoring mechanism system. I wanted to make it so people who use debit cards eventually got credit toward their credit scores. And that’s what we’re doing . This is the first prepaid card in history that is sharing information with TransUnion, a major credit bureau. It’ll be 18 to 24 months before TransUnion — and hopefully other credit bureaus will join us on this — that they will be able to determine if debit card behavior can predict future credit card use.
Vigeland: CardHub.com did an analysis of your card versus the Green Dot card as well as the Amex card. And the one knock it did have is that there are so many different fees on your card — 20 versus eight for the Green Dot and only one fee for the Amex card.
Orman: Oh please, girl friend. Don’t tell me that you are that naive. There is no way Amex has just one fee. There is no way Green Dot has just four or five fees. The person that did that article doesn’t even know how to evaluate cards, let alone be good enough to give a determination on it. The reason that they were able to see all the fees that we could potentially charge, if you don’t use the card the way that we tell you, is because by law, you have to have them. And the only difference is we’re showing everybody the fees, we’re being transparent! All those other cards, you do your homework. You try to find their fees, you try to find out how much it’s really gonna cost you, you’re not gonna be able to, because they are hidden deep deep into the site. Are you kidding me? He was an idiot!
Vigeland: Are you concerned at all that your audience might question you having a card like this, perhaps making money off of them — however little — while at the same time counseling them on their money management?
Orman: I don’t think so. Because the people who have been listening now for almost 30 years, they know that I have earned their trust. They know that I have never put my needs in front of theirs. So I don’t personally care what other people say, because I know what I’m doing and the people who follow me know what I’m doing as well. And we will just see who has the last laugh when it comes to the Approved card.
Vigeland: I was hoping we could have a little bit of fun before we conclude our conversation here. We asked some of our friends on Facebook what questions they would have for you. Do you mind answering a couple of those?
Orman: You got it! I’m up for it!
Vigeland: First: What are some of the biggest changes in your own views on personal finance since you started this part of your career?
Orman: You know, I would’ve told you that years ago, absolutely fund your 401(k) plan to the absolute maximum allowed. Today, I wouldn’t tell you to do so. Today, I would tell you to only fund your 401(k) up to the point of the match. After the match, if you qualify, you should be doing a Roth IRA. If your 401(k) doesn’t match at all, you shouldn’t be contributing to your 401(k) plan, you should absolutely be doing a Roth IRA instead.
Vigeland: Well, here’s another question from Facebook: You know, lots of folks set financial gaols at the start of this new year. They might assume that your finances are in pretty tip-top shape, but did you set any goals for yourself for the year?
Orman: You know, I didn’t set any goals for myself. I set this year as the year that I launched the Approve card. And that I didn’t take any speaking engagements; I have this whole year clear. Because the one thing that I want to see happen before I retire — and I do plan on retiring in about three years from now — and when that happens I wanna know that I have left my mark on this world in a way that no other personal finance person ever would have done. And that is I want debit card usage to be able to create a credit score so that when children go to college, they don’t have to get a credit card just so they can have a credit score, so that maybe one day credit cards become obsolete and we can return to a cash society, albeit on plastic. But that debit plastic gives people credit for the future. And if I can do that, then that will be a great goal for Ms. Orman to finally say, “Bye bye, I’m goin’ fishin’.”
Vigeland: Well I’ve gotta pick up on that. Boy, three years. Tell us what a Suze Orman retirement looks like.
Orman: Yeah, I have a goal there in three years, I’ll be 63, almost 64. And so at that point in time, I want to go around the world on a boat. I wanna go around the world on a boat that I help captain. So, I don’t want to go on a cruise ship. I want to feel what it feels like to live on a boat, go around the world with K.T., who’s my life partner. And girl friend, don’t bet against me of that goal not coming true.
Vigeland: You mentioned your life partner. And on Facebook we had two related questions on same-sex couples. And they both ask basically, what’s the best way to maximize any economic benefits that you do have as a couple even if your union isn’t recognized by your local, state and federal government?
Orman: It’s very very sad, because even if you are recognized, you’re married in a state that may be you happen to be living in, on a federal level, there is no recognition at all.
Orman: So I think it’s very important number one, that you keep money very equal between the two of you, so we never know who’s gonna go first. But that you want to make sure the other partner is absolutely set if something happens. So for instance, I have a lot more than K.T. does, but if I die, K.T. is gonna have to owe estate taxes. A lot of the money that we have is wrapped up in real estate. So I don’t want K.T. to have to liquidate the real estate in order to pay the estate taxes or use up all the money we have in municipal bonds or whatever it may be. So I carry a very hefty insurance on myself, where K.T. is the owner. I am insured, but K.T. is the beneficiary. So if I die, it’s not included in my estate, but it will be more than enough money to pay the estate tax, so K.T. does not have to sell anything or change her lifestyle at all.
Those are the types of planning mechanisms that you can put into effect now so that you know everything will go the way it should. And you really wanna make sure that you have set up not only a will, but you need a living revocable trust with an incapacity clause in it, so that if something physically happens to one of you, the other can sign for you in case you can’t do it for yourself. Those are just a few of the things that you should have in place.
Vigeland: Suze Orman, thank you so much for coming in.
Orman: Thanks for having me.