According to a recent survey, Millennials tend to turn to alternative financial services, regardless of their income level. Young people earning less than $ 25,000 a year use check cashing services as frequently as those earning $ 50,000 to $ 75,000, according to the survey, which, it should be mentioned, was conducted by a provider. alternative financial tools on the Web, Think Finance.
Think Finance, in a survey of just 640 people aged 18 to 34, all of whom have used an alternative financial product in the past year, found similarities in use across income levels. Of course, it’s important to point out, they didn’t interview anyone who made more than $ 75,000.
What the survey found is that prepaid debit cards, check cashing services, option-to-buy rental stores, and pawn shops are being used by Millennials at a declining rate. nearly equal, regardless of their income level. A total of 51% of those surveyed said they had used prepaid debit cards in the past year, both in the under $ 25,000 group and in the $ 50,000 to $ 74,999 group. Another survey, conducted by the National Foundation for Consumer Credit Counseling, estimated that 13% of Americans regularly use prepaid debit cards. Think Finance could not be reached to comment on its methodology.
“Stereotypes that portray users of alternative financial products as poor and uninformed are simply not accurate,” Ken Rees, CEO of Think Finance, said in prepared remarks. The Think Finance study, he said, demonstrates that young people of all income levels “have a need for the convenience, utility and flexibility that alternative financial services offer. less than $ 25,000 (15%).
It may not be a coincidence that Think Finance offers payday loans in a number of states through a product called PayDayOne. In Texas, for example, PayDayOne’s $ 1,200 14-day payday loan comes with $ 298 in fees and interest, or an effective APR of 648.74%. To its credit, PayDayOne is very simple about the fees and interest it charges on these short-term loans: all this information is available in clear on its website.
Another product offered by Think Finance, called Presta, is a rental service with an option to buy high-tech products. After 12 months of renting a property, you are the owner. You can own a 16GB iPad 2 for just $ 17 a week. It sounds appealing unless you consider Apple’s price for the product to be $ 399, which is roughly 23 weeks of payments. After 52 weeks of using Presta, you’ll have paid $ 884 for a product that costs less than half: an effective APR of over 100%. To be clear, however, Presta charges no interest, just a weekly rental rate that effectively funds the purchase of products at outrageous rates. Young people should look high and low for a credit card that charges that much. That said, for a short-term rental, the service seems fair: it’s risky to lend iPads, as anyone with an iPad knows.
Generation Y and alternative financial products
More important, however, is this: Alternative financial products, no matter how transparent the web can make them, always cost more than traditional products. No bank will issue a credit card with 100% APR; no bank would issue short-term loans with an APR of 650%. It’s not the kind of business that attracts loyal customers unless they simply have no other choice. Think Finance presents itself as more practical and transparent than its predecessors, which is certainly true, but it does not help young people to grow their wealth. For this, only savings and investment will do.
Alternative financial products have gained ground in recent years, including rechargeable prepaid debit cards. Once known for their high fees, more established card issuers like Chase and American Express have entered the prepaid market, providing lower-cost options for consumers who can’t afford a checking account or prefer control over it. offers a prepaid card.
But this change in the industry has been slow, about as slow as federal regulators. As it turns out, the CFPB will hold a hearing on May 23 in Durham, North Carolina on the subject of prepaid cards, reports Bank Credit News, which means the industry could face increased scrutiny from the side. regulators. Sounds like it might be too little too late, but it wouldn’t be anything new from federal regulators.
Education, in this regard, is more important than regulation. This United States today Think Finance’s survey reported without even glancing at its methodology or questioning its ability to be unbiased on a study like this discusses the issue at play here. People assume that young people, with their smartphones and jaded attitudes, are just too cool and fast for traditional banking products. We will never save a dime if people keep telling us it does.
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