04/02/2010 05:12 am ET Updated May 25, 2011

Credit Card Legislation Means Consumers Under 21 Need a Way to Navigate the 'Plastic Gap'

In the past several decades, the way we pay for things has made plastic, not cash, king. The rise of plastic began with credit cards which for years have attracted consumers despite high interest rates and constantly changing fine print. The new Credit Card Accountability, Responsibility and Disclosure Act, which takes full effect on February 22, promises to give consumers much-needed relief by keeping more of the hard-earned money in the pockets of the people who earned it.

This sweeping legislation cracks down on rate increases, eliminates certain tricky practices, improves transparency and protects arguably the most vulnerable among us - young consumers. Anxious to make their way in the world and not always aware of the long-term financial consequences of their actions, anyone under the age of 21 will be much more protected from the dangers of credit cards. However, there are consequences they may not like.

They will be required to get a cosigner before being extended credit, forced to better document how they'll be paying any balance, and they'll be taxed with having their cosigner approve any credit line increases. Even if a young person has clearly shown the ability to make timely payments and demonstrated they are more than capable of informed use of their account, they will still be required to keep a cosigner involved in the ongoing management of their finances.

The net result of the above is that millions of young Americans simply won't be able to get a credit card at all because of the new restrictions. That's a problem in a country where electronic payments are ubiquitous, touches every part of our lives and is even mandatory for participation in the fastest growing area of retailing - online shopping.

The fact is that consumers just cannot buy merchandise and services online from Web sites without some type of payment card, but even in-store purchases are much more convenient with plastic payments. Although bank debit cards will fill that void for some, many consumers have already started turning to reloadable prepaid cards because they do not require a bank account as do bank debit cards and you can not overdraw a reloadable prepaid card. The cards function the same as other plastic options and can be used by anyone, regardless of their credit history.

Even before the recession, general purpose reloadable prepaid cards were already used by many of the more than 73 million unbanked and under banked consumers in this country as a low-cost alternative to a traditional bank account. Dwindling credit card limits have led millions more to use reloadable prepaid cards as consumers continue to scramble for alternatives. The new credit restrictions on young people will help significantly increase the number of those who make prepaid their No. 1 option to fill the burgeoning "plastic gap." In 2008, transactions on reloadable prepaid cards totaled more than $4 billion, and forecasts show that number will increase to $12 billion in 2010.

In this great country of ours, we have become prolific consumers partly on the backs of credit cards. However, our youngest consumers deserve the opportunity to be protected from financial missteps that can blossom into long-term problems. The new credit card legislation will certainly change the rules of the game but reloadable prepaid cards are ready to step up and fill the "plastic gap".