It appears the millennial generation prefers not to use credit cards, considering more than six out of ten people ages 18 – 29 rely on cash payments and debit cards instead of traditional credit.
Millennials grew up during the great recession watching people struggle with debt and economic uncertainty. As a generation, also referred to as generation Y, they have low levels of social trust. In many cases they already owe student loans and for them, levels of unemployment and poverty are higher now than they were for generation X at the same age, according to PEW Research.
Those between the ages of 18 – 29 have also witnessed some of their peers struggle with credit cards themselves. Princeton Survey Research Associates International conducted surveys in July and August that discovered 60 percent of those that did have credit cards did not pay their balances in full each month, compared to 47 percent of individuals 30 years and older.
The Princeton Survey interviewed 1,161 adults and found that 63 percent of millennials did not have a credit card, compared to 35 percent of adults 30 and older. 3 percent of millennials admitted to often missing their payments.
The benefits of good credit
Having a good credit score is a sign that a person is responsible. The report suggests the millennial generation is missing out on building a solid credit score and will soon realize that they may require credit to pay for auto loans, make home payments and purchase insurance policies.
In accordance with the Credit Accountability, Responsibility, and Disclosure Act of 2009, no person younger than 21 can receive a credit card unless they prove an ability to pay bills. Despite this limitation, there are ways that this credit-weary generation can begin to build solid credit scores. Parents of those under 21 years of age can register their children as authorized users. The parents will receive the statements but the children will begin accumulating credit history. Also there are some cards with low fixed APR and low credit limits that millennials may start with, knowing that they won’t be able to incur too much debt or have to pay high interest rates.
Personal finance expert Jean Chatzky believes that millennials are missing out. Good credit scores are important for loans, payments and are an indication that a person is trustworthy to prospective employers and to society at large.
“As far as for car insurance goes, your credit history is a better indicator of risk than even your driving record,” says Chatzky.Back To Blog