By: Joe Gillen
Government agencies have made repeated assertions that low-income Americans are opposed to emergency cash products such as overdraft protection. But the data doesn't back that up. Young Americans of all income brackets readily seek out and use emergency cash services to help them overcome financial setbacks.
The Millennial generation - those between ages 18 and 34 - earning mid- to high levels of income uses emergency cash products at the same rates, or sometimes higher ones, than lower-income demographics, according to a survey from Think Finance. In addition, users of these products don't consider them to be predatory or excessive as consumer groups have long railed, but instead view them as an important financial tool.
In the study, 62 percent of respondents who have used an emergency cash product said they consider the products to be extremely, very or somewhat important. Eighty-three percent said they had a very positive or neutral experience with overdraft privilege programs or other emergency cash services. In addition, 21 percent said they were extremely satisfied.
"Stereotypes that paint users of alternative financial products as poor and uninformed are simply not accurate," said Ken Rees, CEO of Think Finance. "This study confirms that young people across the spectrum have a need for the convenience, utility and flexibility that alternative financial services provide."
Fifty-eight percent of respondents earning between $50,000 and $74,999 annually reported using overdraft protection compared with only 31 percent of those making $25,000 or less. Using the same income levels, 22 percent of respondents in the higher income bracket reported using prepaid cards, cash advances and other emergency cash services compared with just 15 percent of those in the lower income bracket. Additionally, 37 percent of higher-income Millennials report using bank direct deposit advances as opposed to 22 percent of those in the lower income category.
"In an ideal world, cars wouldn't break down, pets would never get sick and everyone would have a fully-funded emergency account," Rees said. "Unfortunately, that is not reality and Millennials, many of whom are managing high student loan debt loads, may find themselves in need of emergency cash solutions. It is gratifying to know that on the whole, Millennials are able to find solutions that help get them through tough times."