NerdWallet is continuing its crusade against prepaid cards, this time in a blog post that suggests Millennials should consider secured credit cards over prepaid cards. The post was prompted by a study from TD Bank that said one-third of millennials had used prepaid cards and another from Well Fargo that said 40% of millennials say they are overwhelmed by debt.
The article’s “Bottom Line” was as follows:
“Prepaid cards are becoming more popular because they promote concepts that are becoming increasingly important to millennials, including spending only what you have and staying out of debt. However, prepaid cards can come with a lot of fees, and users can miss out on an opportunity to build their credit and earn rewards. For those who want to build and maintain good credit, there are better options.”
But really, should anyone recommend that budget-conscious individuals take on more debt in the form of secured cards when they can manage money more closely with prepaid cards? In addition to higher interest rates and maintenance fees, secured credit cards may require a large upfront deposit. Someone struggle to manage money may not have the extra $2,000 that the article suggests could be put on a secured credit card.
Prepaid cards offer a tool that can keep people out of debt and offer them a level of security in transactions not available to other payment types. Suggesting that debt-laden millennials take on additional high-cost debt instead of using prepaid cards is irresponsible.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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