DES MOINES, Iowa (9/4/12)--Reloadable and gift cards help community financial institutions (FIs) solidify existing relationships and attract new members, including Gen Y, by tapping the products' ability to offer financial freedom, according to a new white paper released by The Members Group (TMG).
"To ensure the sustainability of their business, credit unions and community banks understand they must find ways to maintain relationships with their 13- to 19-year old customers," said Konrad Christensen, TMG retail payments product manager and author of the white paper. "Enter prepaid products--they are tailor-made for this demographic, offering teens' financial freedom and giving peace of mind to their parents."
Reloadable cards are ideal for Gen Y, Christensen writes in "The Gen Y Power of Prepaid." Offering teens overdraft-free access to funds, prepaid cards allow young people to make purchases without the risk of spending more than they have.
With a reloadable card's direct-deposit feature, parents can instantly deposit more money onto the card through an online application, in an issuer's branch or at many retail and convenience-store locations. The cards also allow teen consumers to build internal credit with their credit union for future loan applications.
But gift cards also offer parents a level of control. Teens can't use gift cards at ATMs. At first blush, this may look like a negative, but some parents are interested in monitoring their child's spending. This can be done with a reloadable card—until the teen cardholder uses his reloadable card to access cash.
Consumers value gift cards. When asked by First Data whether a recipient would rather get a $30 gift or a $25 gift card, nearly 80% opted for the gift card.