If a payment card is easy to use, helps keep a tight budget in line and protects sensitive information, millennials are likely to consider using it.
A TD Bank survey of more than 1,300 Americans found that 33 percent of millennials either currently use or have recently used a reloadable prepaid card, compared to 25 percent of the overall population.
That’s not all. Of the millennials who don’t use a reloadable prepaid card right now, 60 percent said they would consider using one, compared to 49 percent of all respondents. The older the respondent, the less likely he or she is to express interest in such a payment product.
“Millennials quickly adapt to new tools and technologies that help them manage money more efficiently,” said Tami Farrow, senior vice president for TD Bank, in a news release. “We know from our continued research that millennials favor debit cards and want to avoid overspending. Prepaid cards provide all the flexibility of a debit card, but with the added control of only spending what you load.”
For those concerned about spending beyond their means with a credit card or overdrafting a checking account, a prepaid card can be a good option. Once the money that is loaded onto the prepaid card is gone, that’s it. There’s no way to blow your budget with extra fees by overspending.
Additionally, an overwhelming majority — 85 percent of millennial respondents — believe that their money and personal information is extremely secure or very secure when using a reloadable prepaid card, especially for online shopping and bill pay.
They aren’t wrong about that, either. Prepaid cards offer some of the same protections as traditional credit cards. Most issuers will restore the balance of a lost or stolen registered card and prepaid card balances are insured by the Federal Deposit Insurance Corp. up to $250,000.
“Not only do most cards — especially those that are bank-issued — provide protections from things like fraud, but they also allow these consumers to safely transact in our increasingly digital world,” Farrow said.
Young adults are even willing to pay a small monthly maintenance fee to use reloadable prepaid cards. Of course, most would prefer cards to be fee-free, but 41 percent wouldn’t mind paying a little extra to access the benefits of a prepaid card. Older card users are less willing to pay for the typical prepaid card fees for everyday activities such as withdrawing money from ATMs, checking balances and adding funds.
I’ve never used a reloadable prepaid card before, but I think it’s interesting that other millennials have recognized the potential perks of using such a card. One aspect of prepaid cards the study didn’t touch on but I think is worth noting — especially for younger individuals — is how easily accessible the cards are.
Teens who are new to managing money or an older millennial with little-to-no credit history can get a prepaid card at a bank, big box store or even a pharmacy and learn to manage money that way before making the move to traditional credit cards. Prepaid card users won’t build a credit history using the card, but can learn valuable lessons about spending and managing a budget.
I wish I would have eased into using credit cards a bit more slowly. It never hurts to be a little extra cautious when it comes to managing your finances.