Jul 30, 2013 Dave King
Since the end of the financial crisis, millennials in the United States have been ditching credit cards in an attempt to avoid the debt that comes with them. This could be bad news for banks and businesses, but there are other ways to attract customers such as prepaid debit cards and other alternative payment options.
According to recent analysis by FICO, in 2012 16 percent of Americans aged 18 to 29 had no credit card at all, up from 9 percent in 2005 before the recession hit.
Frederic Huynh, senior principal scientist at FICO, told the New York Times that the percentage of consumers in other age groups who don't have a credit card is growing as well. However, it isn't as drastic as millennials, with those aged 60 and older having no card hitting 2 percent in 2012, from 1.5 percent in 2005.
With fewer younger Americans opting for plastic, it would be easy for banks to panic, but there are still other ways to draw in customers.
For instance, prepaid debit cards could become a more popular offering, as these don't come with the same debt risk as credit cards. Additionally, offering alternative payment options, such as mobile phone applications, could also be a good move, Business2Community reported.
Banks aren't the only institutions that will need to respond to this trend, as businesses should make some changes as well. As more younger Americans begin to shift away from credit cards, companies will need to begin to prepare to take alternative forms of payment. For example, if a retailer is unable to accept payment via a smartphone, it could end up losing customers, so now is the time to install this technology before it is too late.