Young consumers increasingly turn to prepaid cards
Jul 03, 2013 Sean Albert
After seeing their parents struggle during and after the Great Recession, many younger Americans have turned to alternative credit solutions, such as debit and prepaid cards.
In fact, FICO told CNN that the number of Americans aged 18 to 29 not using credit cards has doubled since the financial crisis, and 16 percent had no credit card at the end of 2012.
While many younger Americans have increasingly utilized their debit cards, the popularity of prepaid cards is on the rise.
"There has been very aggressive marketing of prepaid debit cards over the past few years targeting young people and minorities," John Ulzheimer, president of consumer education at SmartCredit.com, told CNN. "So it's not a surprise that more young people are using prepaid debit cards over credit cards."
Evidence of this transition can be found in the most recent consumer credit numbers from the Federal Reserve. Revolving credit, which is measured by credit card use, increased by $628.3 million in April, after a $906.4 million dip in March.
Average credit card debt among Americans age 18 to 29 has declined since the recession. CNN reported the average person in the age group has $2,087 in debt, down from $3,073.
Overall, consumer credit increased $11.1 billion in the first quarter, slightly lower than the $12.9 billion projected by economists surveyed by Bloomberg.
As credit card usage continues to decline among younger Americans, financial institutions would be wise to offer prepaid card options to stay on par with competitors. These options can be especially useful for people who have previously had negative marks on their credit reports, as prepaid cards don't require the same extensive checks as credit cards.