Celebrity personal finance expert Suze Orman has launched aprepaid debit card that, if it becomes popular, could wind upcosting credit unions significant amounts of money.

Orman has appeared widely for the NCUA on behalf of creditunions, highlighting the fact that money deposited in credit unionsalso carries federal insurance just as deposits in federallyinsured banks do. She has also often promoted credit unions as aconsumer-friendly alternative to banks in her television programscarried on CNBC.

Orman's card, which she dubbed the Approved Card, is a prepaiddebit card that is decoupled from any corresponding depositaccount that the cardholder owns or controls. Such decoupled debitcards are not new and have been used by different issuers,particularly those seeking to draw unbanked customers.

The Approved Card differs from most prepaid cards, however, inthat Orman has tried to give it a lower fee profile than othersimilar cards and has also added consumer-oriented modificationsand services to the card.

These include zero-liability protection by virtue of it carryingthe MasterCard logo, free access to credit reports from TransUnionand identity theft protection from TrustedID, the ability to set upan emergency fund and the collection of transaction data byTransUnion to possibly augment existing credit reports, whichgenerally do not include such data.

The Approved Card, however, does still carry fees. The card willcost cardholders $3 per month and will charge cardholders $2 perATM transaction if they use an ATM not affiliated with the AllPointnetwork or if they do not load at least $20 on the card eachmonth.

Additionally, if a cardholder gets cash back when making apurchase at a retail store, it will cost $2 and while the firstcall each month to a customer service representative will be free,any subsequent call that month will cost $2.

This compares favorably with the fee schedule for the ATIRAreloadable card, a prepaid reloadable card offer by the The MembersGroup and co-issued with a number of credit unions around thecountry. According to the card's website, those cards charge $9.95per month as a maintenance fee and $1.50 for secondary customerservice calls and 50 cents for every automated customer servicecall per month after the second one.

The problematic part of the Approved Card, from a credit unionpoint of view, comes in its decoupling.

Unlike traditional debit cards that make their issuers, such ascredit unions, a small amount of money from card interchangewhenever they are used, decoupled prepaid cards rely on ACHtransactions to move money from cardholders' deposit accounts withfinancial institutions. Orman's Approved Card may also be fundedthrough direct deposit and cash deposit, but to the extent that itis run as a decoupled debit card, it will take money away from CUand bank debit card programs.

When contacted about this phenomenon, a spokesman for theApproved Card said that Orman supported credit unions and didn'tsee any conflict with existing CU cards.

“Suze believes that if you are happy where you are, and you’vegot a good deal, you should stick with it,” the spokesman wrote viaemail. “She is supportive of credit unions and if someone is usinga prepaid debit card from a credit union that they believe isworking for them, then that’s great. Her primary concern is thatmany consumers are being taken advantage of by other card programswith hidden and exorbitant fees, and she wanted to offer people analternative that would benefit them, and provide them greatvalue.”

A bigger concern may be that, in addition to fee income, Orman'scompany makes debit interchange from the card.

One of the benefits that Orman touts for the Approved Card isthat cash deposited on the card is insured by the FDIC. It carriesthat insurance because the card is issued by Bancorp Bank, aleading issuer of credit and prepaid cards.

When contacted about the interchange, Approved LLC, the companywhich partners with Bancorp Bank, to issue the card, initiallyprovided a statement from its President Kim Bishop. “Like all cardissuers, we do receive a portion of the interchange fee,” saidBishop. “Our program is not different in this regard than any othercard program. There are fees for the operation of the program.”

Later, a spokesman for the Approved Card added that the feeswere necessary to pay for the several parts of the card that areprovided free to consumers.

“The Approved Card has unrivaled benefits, including freeelectronic bill pay, free TransUnion credit reports and scores, andfree Identify Theft protection from TrustedID,” the spokesmansaid.“ There are expenses for all programs, and we have theseadditional benefits, which is why there is a monthly fee.”

But there are indications that consumers have not welcomed thefees and card industry analysts have spoken out on the issue aswell.

Ondine Irving, founder of Card Analysis Solutions, who workedwith Orman from June to October 2010, said she does not back theApproved Card.

“I am not a supporter of the card, and time will tell if thepublic accepts it,” Irving said. “Based on the feedback on Twitterand Suze's Facebook page, her followers are disappointed in herdecision to peddle yet another product. The $36 annual fee,collected at $3 per month is not setting well withconsumers.”

She also noted that the card does not introduce unbankedcardholders to the banking system. “The Suze Orman prepaid carddoes nothing to establish a full-service banking relationship,”Irving observed. “And as much as people may have hatred for banksand less for credit unions, the fact remains lending is a part ofthe American way of life. Credit unions establish and fosterlifelong relationships with members to service all of theirfinancial services needs. And a prepaid card is a stop-gap measureand in no way will ever replace full-service relationships.”

Industry analyst Bill Hardekopf, who is also CEO oflowcards.com, a website devoted to helping match consumers withcredit cards, noted that the TransUnion credit reports are only oneof three different credit reports that could exist about a consumerat any one time and that they are not the same as the highlyinfluential FICO score.

“A debit card linked to your checking account is much betterthan a prepaid card for most consumers,” Hardekopf said. “A debitcard will not have the monthly or usage fees that are common withprepaid cards, even this new one from Suze Orman. But for peoplewho don't have a bank account, or may have some credit problems,her card may be a good alternative.”