Prepaid Options Appeal To Younger Members

When a debit or credit card won’t cut it, reloadable prepaid cards offer a way for credit unions to build relationships with the sought-after Millennials and Generation Y.


Every year, 15- to 24-year-olds spend more than $500 billion. Whether these teens and young adults are working at the public pool or schmoozing their parents for $20, their spending power is significant. That’s good news for cooperative financial institutions that are trying to capture this consumer segment, nurture those relationships with “cool” services, and grow these younger members into lucrative business partners with product needs.

Only half of this age group has a checking account, according to a PSCU whitepaper on the opportunity in prepaid cards for students and teens. Of those, only 25% have a debit or ATM card. By 2013, the fastest growing segment within the prepaid market will be students and teens, with spend volume projected to reach approximately $5.5 billion, according to the whitepaper.

Community 1st Credit Union ($397.2M, Ottumwa, IA) launched a reloadable card in November 2011. After offering gift cards for several years, the credit union noticed the purchase and usage of the cards dropped off after the holidays.

“We were looking for a product that would maintain momentum throughout the year,” says Dan Herder, operations assistant of Community 1st.

So the credit union started offering a personalized prepaid card with a minimum deposit of one cent and a maximum deposit of $30,000. The card costs $4.95 upfront with a monthly fee of $4.95. The credit union can waive the monthly fee for six months if the member sets up a direct deposit and can waive the fee altogether if the member deposits $1,000 per month on the card (the credit union allows members to transfer money to the card 10 times in a month).

Community 1st targets consumers ages 13 to 22 by offering reloadable cards with its student checking account. The card is connected to a website that allows members to load money, check transaction history, and ask for assistance. Parents can log in to check their child’s transactions and load money on the card. For youths, the card offers independence from parents, as prepaid and reloadable cards don’t require a parental co-signer, in a form that is safer than a debit card, as there are no overdraft fees.

Many teens and young adults recognize these advantages. Community 1st has sold 179 reloadable prepaid cards since January. The credit union leads the 46 financial institutions that are serviced with ATIRA gift and reloadable cards through The Member’s Group, Herder says.

“We have been surprised by the way the program has taken off without much babysitting from our end,” Herder says.

The reloadable card program has helped soften the post-holiday gift card drop-off. What’s more, research suggests offering reloadable prepaid cards in conjunction with gift cards is a one-two punch for sales. According to TMG, clients with both reloadable and gift card programs increased gift card sales 36% in 2011. By comparison, those that offered only gift cards increased sales only 10%.

Do You Know Your Youth?

When it comes to banking assistance, 40% of Millennials and Gen Y rely on their parents instead of a financial institution, according to the PSCU whitepaper. Offer personalized products and services to start building relationships with these consumers. Such a strategy is easier and less expensive to sustain through online and mobile banking — the very channel this group chooses to access their products. From 2009 to 2010, mobile data usage by teens grew 340%. By offering mobile access to a prepaid product, credit unions position themselves as an appealing financial services provider. 

For its part, Community 1st offers text message alerts, to both card holders and their parents, for money transfers and transactions.

“That generation was brought up with electronics like this so they’re much more comfortable and less resistant to it,” Herder says. Plus online and mobile banking is eco-friendly, says Herder, and with less branch transactions the front-line staff is free to serve members in other capacities. 

Marketing To Millennials And Gen Y-ers

Marketing prepaid cards to students, teens, and their parents doesn’t have to be more difficult than other segments, just know the audience. This group of consumers text more than any other segment of the population. Text alerts with advertising and marketing thrown in appeals to tech savvy youth who want to access their products and services in a variety of delivery channels. In addition to texts, make sure messages resonate online, where young members who are logging in to view their prepaid card activity will see it.

Friendly competition attracts members that are more comfortable in teams — think basketball players instead of chess champions. Teach young members how to use prepaids to budget, then sponsor a challenge that puts their new skills to the test. Solicit direct feedback, and start conversations with members using forums, blogs, and financial literacy seminars.

Family-centric young consumers want a suite of products similar to their parents. Deposit and lending products are important, but don’t overlook prepaids. Credit unions can market reloadable prepaid cards as a budgeting tool for the entire family. In the beginning, parents hesitant about ceding financial sovereignty to children can exercise greater oversight. But as young adults demonstrate sensible behavior, they can take complete accountholder responsibility.

Above all else, these consumers value loyalty and want to know they are not just a name on a target list or a possible loan lead. Show them the credit union cares about their financial well-being by offering a prepaid tool that allows for visual tracking of savings and spending. Market that tool as just another example of the credit union difference.




Sept. 10, 2012


  • As a mother of two teenagers what a great way to capture their business.