Youth cards are a growing marketing opportunity

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By: Wise Marketer Staff |

Posted on July 6, 2010

Prepaid cards that carry network brands such as Visa or MasterCard are gaining in popularity as gift cards for younger consumers, according to the latest Cardbeat report by Auriemma Consulting Group (ACG).

The survey found that 42% of consumers had received a network-branded or open-loop gift card, compared to 67% who had received a store-specific gift card, representing a significant increase since the 2005 survey in which only 26% had received open-loop cards.

According to Cardbeat editor Nancy Stahl, this success comes - perhaps ironically - at a time when prepaid card issuers are increasingly trying to distance themselves from simple gift cards.

The US-based 'CARD Act' legislation (which regulates fees and expiry dates on gift cards) does not apply to general-purpose prepaid cards, and marketers of network-branded cards are working hard to reposition the product in the consumer's mind.

"However, card issuers have not yet made much headway," explained Stahl. "General-purpose stored value cards have the potential to replace traveller's and payroll deposit cheques in the same way that gift cards replaced paper gift certificates, but fewer than 10% of US consumers have actually used a prepaid travel or payroll card."

An increasingly popular variation of the general-purpose reloadable card is aimed at teens and young adults - a market may be poised for growth, according to Stahl.

Indeed, although familiarity and usage of youth-oriented prepaid cards were low, parents in the survey were relatively receptive to the concept. About one third were quite positive, and another third were willing to consider the product.

Parents liked the idea of their child having a card to use in an emergency (64%) and felt that the card offered greater security for their child than carrying cash (59%). A current example of such a card is the American Express PASS card, which is competing head-to-head with Visa Buxx.

"Card issuers should emphasize the security benefits, and position such a product as a prepaid debit card, which many consumers perceive as being safer than a credit card," suggested Stahl.

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