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Many articles and blog posts today claim that Millennials are suffocating in debt. A marketer obsession, Millennials apparently lack the intellectual wherewithal to put what little money they have away, and are keeping major lending institutions in champagne wishes and caviar dreams. And while the latter may be true, what we found by engaging Millennials directly is that they are exceedingly more fiscally prudent than older generations. Millennials are, in fact, trying to reverse their financial woes, and marketers at credit card companies need to pay attention if they'd like to continue to win the business of this generation.

The first hallmark of someone bad with money is their reliance on credit cards. And credit cards are increasingly the black sheep in Millennials' currency family. Vision Critical asked 1001 members of our Springboard America community what payment method they use to buy a wide array of products and services, ranging from gas and groceries to meals and movie tickets. In no category is a bank credit card (like Visa or Mastercard) the most preferred way to make payment, and only in rare instances (like purchasing big-ticket electronic items or furniture) is it second to either bank debit cards or cash. Conversely older people - especially those over 55 - routinely make credit cards a first or second payment option; Gen-Xers often serve as the bellwether between Millennials and Baby Boomers payment preferences.

Millennials' disenchantment with credit cards has nothing to do with security issues. For all the fuss about data breaches at several major retailers, Millennials seem nonplused about it all. In fact, less than one-in-ten 18-to-34-year-olds generally don't feel safe/secure making payments with debit or credit cards. And just one-in-ten of Millennials feel unsafe using store credit or debit cards at the likes of Target or Walmart.

Like being forced to take off your shoes at security checkpoints or being asked to use CAPTCHA to submit online forms, dealing with cyber-hacking is just part of being a young person - and mostly all they've ever known. Further, most financiers concur that consumers are more vulnerable to theft with debit than credit cards, and yet debit cards are overwhelmingly Milllennials' preferred payment method, so security fears aren't to blame for credit cards' woes.

In many ways, debit cards are Millennials' perfect conduit between cash and credit. They mimic cash but have the utility and perceived security of credit cards; further, debit cards don't portend the disposability (and immaturity) of cash and provide users a veil of sense and sensibility. In other words, with credit cards you don't need know when to say "when," and for young people still getting their financial bearings, that amount of latitude can be too great a temptation.

Ironically young people appear to be heeding Baby Boomers' credit-card-eschewing "spend only what you have" hand-me-down that Boomers, themselves, are largely ignoring. Exactly half of Millennials (50%) say bank debit cards are the way they prefer to make payment, well ahead of both cash (40%) and credit cards (32%). Further, PayPal - which, in many way, is an online version of debit - is seeing a surge in usage among young people. Nearly a third more are using PayPal more now than versus a year - or at least twice that of both Gen-Xers and Baby Boomers.

But the news isn't all bad for credit cards: Nearly three in 10 Millennials (28%) tell Vision Critical that they're using credit cards more now than they were a year ago, but just one-in-seven (14%) are using them less. That said, there's still a significant percentage of young people (26%) that don't or never have used credit cards, in stark contrast to the outliers who rebuke debit cards (10%).

For credit-card companies to help gain back young people's trust, they'll first need to understand why, for example, more than one-fourth of them don't use them—the type of knowledge an insight community can provide. Further, crafting your marketing strategy based on generational stereotypes (in this case, about Millennials) can be dangerous. Companies should engage their Millennial customers to verify what they think they know about them. It's worth exploring what goes through Millennials' minds before they go through their wallets or purses searching for a way to pay.

In the interim, credit-card companies would be well-served not just contacting users when there's suspicious activity on their card, but when they appear to be overextending themselves based on previous purchasing behavior. Perhaps set up a program that rewards members with loyalty points or cash back for using their card up to a certain limit, and penalize them for exceeding it. This way you'll show you're not all about your bottom line but theirs too.

The Everything Guide to Millennials

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