This is a sponsored post on behalf of PayPal Credit. While I was compensated for publishing this post, all opinions are my own.
What percentage of millennials do you think use credit cards?
75%? 90%?
Not even close.
More than 6 out of 10 millennials do not have a credit card. That means over 60% of millennials utilize alternatives to credit cards when making purchases.
Millennials are turned off from traditional credit cards for a number of reasons. A rigid payment structure and general lack of technological innovation are two reasons. Other reasons include the hassle of applying for credit, dealing with banking institutions we do not trust (bailout anyone?), and desiring technology that is more integrated with our lives.
Today I want to go through 3 good alternatives to credit cards. While some of these alternatives are not new, there is innovation going on in the area of “alternative credit.” Much in the same way that transportation and travel have been shook up by Uber and AirBnB, there is demand for “a better way” to utilize credit that is more in-line with millennials lifestyles.
1) Cash
Many personal finance gurus advocate using cash instead of credit cards. If you have ever heard of Dave Ramsey, you probably know that he advocates people use a “cash envelope” system where you have an envelope filled with cash for each weekly or monthly expense. Once you run out of cash, that’s it – you have to wait until next month for the envelope to be replenished.
Besides a traditional savings account that cash can be deposited and withdrawn from, there are a few other alternatives that have become popular. Cash cards are more popular than most people think, with many choosing this credit card alternative as a way to store and use their money.
Another alternative that has become increasingly popular is PayPal. Many consumers and businesses utilize PayPal for transactions. It’s becoming even more popular as larger retailers such as Home Depot are allowing users to pay using their PayPal account.
2) Debit Cards
Many millennials utilize debit cards and avoid credit cards altogether. Having a checking account with a debit card linked to it is a more efficient form of using cash to pay for things. After all, a checking account is essentially the same as having physical cash except for the fact that it’s electronic.
Checking accounts make sense for millennials because it’s truly made for processing payments. Despite the advanced features of many “cash cards” on the market today, nothing compares to the flexibility that a checking account offers. Many of the new innovations in the payment processing and credit industry rely on a user having a checking account that can be linked to the app or program.
Some millennials utilize debit cards in tandem with other payment options, such as credit cards or “alternative” credit, which I will discuss next.
3) Alternative Credit
The most innovative alternative to credit cards is alternative credit. Alternative credit is still credit, but it attempts to break outside the box of traditional credit by being more technologically integrated, flexible, and build on the trust that brands have built.
One form of alternative credit is PayPal Credit. PayPal Credit builds on the trust that the PayPal brand has built over the past 15 years. According to Javelin Research, PayPal is the most trusted partner for mobile payments ahead of traditional credit card providers and other technology companies.
Research from Koski Research shows millennials also are nearly twice as likely as baby boomers (50% versus 29%) to prefer using products from innovative tech companies. None of this should be a surprise, though, as nearly 70 percent of millennials are more likely to trust companies that are technology based.
Two ways PayPal credit differentiates itself from traditional credit is that it offers more repayment options to consumers as well as a six-month interest-free grace period on orders of $99 or more. With PayPal Credit’s Easy Payments system consumers can divide larger purchases into equal monthly payments, based on terms that they want.
Consumers are able to choose a 6, 9, 12, or 24-month payment plan that displays interest, monthly payment amount, payment total and a repayment schedule up front. Additionally, on orders of $99 or more PayPal gives six months to pay off the purchase without paying any fees or interest.
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Credit card use among millennials isn’t nearly as widespread as most think, with less than 4 out of 10 millennials utilizing credit cards. This trend coincides with both a distrust of financial institutions and a desire to “shake up” industries that haven’t seen innovation for decades.
The Financial Technology industry has been ripe for innovation and we’ve seen thousands of companies pop up over the past few years looking to make an impact on the industry. The trend will only continue as millennials look for alternatives to
We all know about the huge impact Uber has had on the transportation industry, but what other innovations have you seen? What would you like to see happen within the next few years?
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Really interesting statistics on credit card use among millenials. I’ve enjoyed seeing the cell phone industry change. A few huge companies used to hold most of the market, making service way too expensive. I like that smaller companies are using wifi and other technologies to provide more reasonable service and more options for consumers. It would be nice to a similar trend with Internet providers.
We are seeing changes in the way people consume content. Netflix, Apple TV YouTube, etc The traditional cable companies are turning more into data companies. Interesting to see how it evolves over the next 5-10 years.
Pretend to Be Poor I was surprised at the statistics as well! I would have expected a much higher rate of millennials having credit cards.
The best part about the cell phone industry change is that it’s forced the bigger companies to step up their game. With more competition they are forced to figure out ways to accommodate lower price demands.
DebtDiscipline Definitely. Just yesterday I heard an entrepreneur (who has some credibility in the trend-spotting department) say he expects television to be radically changed over the next 10 years because people simply do not watch commercials.