The Subprime Generation: Stop Using Dubious Financial Services!

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Jessie L. Bonner / AP

Using a check casher is not the wisest financial move. Yet many young people do it anyways.

More young Americans – even those earning between $50,000 and $75,000 – are using payday lenders, prepaid debit cards and other questionable financial services. But there are better alternatives to those “alternatives.”

It’s no surprise that millennials making less than $25,000 would gravitate toward alternative financial services. Low-income Americans often have difficulty opening checking accounts and securing lines of credit, after all. But a new survey finds that even 18- to 34-year-olds making close to $75,000 often rely on these services, which tend to charge disproportionately high fees.

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According to a study released by Think Finance, 51% of young Americans making $50,000 to $74,999 used prepaid debit cards within the last year, the same percentage as those who made less than $25,000.

Twenty-nine percent of those in the $50,000 to $74,999 range said they use check cashing services, compared with 34% of those under $25,000 who use them. And 17% of those near the $75,000 mark made purchases at rent-to-own stores whereas only 15% of those who made $25,000 used them.

What may be even more startling is that millennials seem satisfied with these services. According to the study, 83% of those who use emergency cash products said they had a positive or neutral experience with them.

While it’s not entirely clear why so many young people are using these services, Eric Bell, founder of (and a millennial himself), says that many of them are frustrated with the traditional financial system and don’t trust institutional banks and lenders. But it’s also a financial literacy issue.

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“They don’t know better alternatives are available,” Bell says. “For a lot of low- and moderate-income people, they see check cashing services near them instead of banks and branches, and they just go there instead.”

But what many of them may not realize is that there are smarter financial steps they could make, and a few simple moves could save them a lot of money in the long run.

1. Instead of Prepaid Debit Cards: Secured Credit Cards Young Americans who can’t get a regular debit card — a clearly better alternative — should try using a secured credit card, suggests Bell. First, they’re easy to get. Second, by placing a small amount of money on the card that acts as your credit limit, you can use the card much like you would a real credit card — and you’ll be able to build and improve your credit.

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2. Instead of a Check Cashing Service: Credit Unions Many young people are turned off by too-big-to-fail financial institutions these days, which is one reason they turn to check cashing services. But Bell suggests that instead, they should determine if they’re eligible to join a credit union. “Oftentimes you get better service and they seem to care more about your money than they might at Bank of America,” Bell says. Plus, credit unions often provide the same sorts of basic services big banks do without the fees found at check cashers.

3. Instead of Payday Lenders: Person-to-Person Lending Services For those who use payday loans, a better alternative may be newer person-to-person lending services like and They work by having investors initially give money that is then lent those in need. While Bell says the interest rates may not be the best, you’ll likely save money in the long run.

4. Instead of Pawn Shops: Thrift Stores Many of those surveyed also said they used pawn shops within the last year, but there are much better options. First, there’s always Craigslist if you’re looking to hawk your wares. But a better solution may be a consignment or thrift shop. “You’ll still probably take a deep discount,” says Bell. “But it’s one way to get some cash in your pocket without taking the haircut you would at a pawn shop.”

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