Prepaid cards have struggled against the perception that they are disposable and predatory. A card designed around the teachings of personal finance guru Suze Orman is aiming to break those stigmas, and it may displace long-term banking relationships in the process.

Whereas most prepaid cards are focused around spending, the Approved card, which Orman announced Jan. 9, allows the user to move funds into six other buckets for long-term savings. It also provides continuous access to TransUnion credit reports for a year and encourages "sticky" banking habits such as online bill payment.

"For some consumers, prepaid cards represent an alternative to a traditional bank account," Mark Schwanhausser, a senior analyst for Javelin Strategy and Research, said in an email. "But that means prepaid users will have the same need to monitor their accounts and spending."

The long-term savings accounts are meant to accommodate an emergency fund for eight months of expenses, something Orman constantly urges her television audience to do.

The card might appeal to the so-called Gen Yers, consumers between the ages of 18 and 35, who are less committed to having a dedicated bank relationship because they don't like the fees and big account limits associated with such accounts, experts say.

About 43% of prepaid card users are Gen Yers, according to November 2010 survey by Aite Group. And nearly 40% of prepaid users who describe themselves as underbanked said they had used a prepaid card in the previous seven days, according to an October survey from Javelin.

"Younger people are not interested in traditional checking accounts;. They don't write checks, and their need to write them has diminished, particularly with fees on checking accounts," says Patricia Sahm, managing director of Auriemma Consulting, of New York.

The card, which is a MasterCard-branded product issued by Bancorp Bank of Wilmington, Del., also provides users with a dashboard for reviewing spending trends and setting up notifications and alerts.

The Approved card's pricing also may set it apart from other celebrity-endorsed cards (see story).  The infamous Kardashian Kard shut down after it was criticized for charging up to a year's worth of fees up front, even though its monthly pricing was in line with mainstream prepaid cards.

In contrast to the Kardashian Kard, the Approved card is affiliated with a personality who represents financial responsibility, not excess, experts say. (Neither Suze Orman nor her representatives made themselves available to comment.)

"This is much better priced than trendier cards, such as the Rush Card," says Brian Riley, a research director in the bank cards practice at Towergroup, referring to the card offered by media mogul Russell Simmons' UniRush LLC. Representatives from UniRush did not respond to an interview request.

Though the Approved card's fees are low, it still has nearly two dozen of them. It is free to load for those who set up direct deposit, but it has an initial $3 purchase fee and a $3 monthly fee. It also charges for calling a live agent more than once a month, for receiving a paper statement and for issuing payments to billers by check. It also charges $30 for payment inquiries.

ATM withdrawals are free for consumers using machines on Cardtronics Inc.'s Allpoint network. For other ATMs, consumers pay $2 plus any surcharges the ATM owner might assess.

Still, the pricing is impressive because it compares with Wal-Mart Stores Inc.'s card, which has much wider distribution and scale, says Bart Narter, senior vice president of Celent's banking group.

"I am impressed by [Orman's] ability to have such low pricing given her lack of volume currently," Narter says.

But aside from the low monthly fee and the free credit report, "quite frankly this looks like a lot of other prepaid cards on the market," says Madeline Aufseeser, a senior analyst for Aite Group. "And except for the credit-reporting piece, I don't know how much value this adds."

It is the TransUnion component that experts find most intriguing. Orman's deal with TransUnion requires the credit bureau to examine spending data on their cards in attempt to help them build credit files, according to The New York Times. (TransUnion could did not reply to a request to verify this point.)

So-called thin or no-file consumers may benefit from such a move.

"It's a struggle within the industry for debit and prepaid card users about how to help consumers establish credit and a credit file when they don't have credit," Aufseeser says.

For its part, MasterCard seems to be developing a niche in the prepaid market associated with financial-advice celebrities.

In its well-publicized plans to target the Hispanic market through non-traditional payment products such as prepaid cards, MasterCard has enlisted the help of Univision Commuication Inc.'s financial expert Julie Stav (see story).  In 2009 it announced plans to issue the Tarjeta Univision MasterCard Prepagada, a prepaid card which leverages the Univision brand. MasterCard did not respond to an interview request.

The Approved prepaid card has as good a chance of surviving as any out there, experts say, but some wonder if the product may cost Orman some of her audience.

"One of the appealing things about Suze's shows is her independence, so hopefully her entree into cards does not dilute that," Riley says.

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