Good or Bad? Fewer Millennials Are Using Credit Cards


Good or Bad? Fewer Millennials Are Using Credit Cards

Nov, 2nd 2016

According to recent data from the Federal Reserve, the percentage of Americans under the age of 35 who hold credit card debt is at its lowest level since 1989. The millennial generation, now entering adulthood, is showing signs of less credit card use than their parents’ and grandparents’ generations, racking up less debt and showing fewer resulting financial struggles. But why are millennials more reluctant to sign up for and use credit cards—and is it as good a development as it seems?

Why Millennials Are Afraid of Credit Cards

Millennials have seen the effects of overspending firsthand; they’ve grown up while witnessing the economic collapse of 2008 and likely have parents who have or are currently struggling with credit card debt. They’ve come to see debt as a crippling burden—which it can be—and therefore wish to avoid accumulating any debt whatsoever. This hypothesis also holds true in other areas; millennials are pursuing fewer home mortgages and auto loans than the generations that came before them.

Other Factors

There could be other factors affecting millennials’ credit card use. For example, the CARD Act, passed in 2009, put strict limitations on how credit cards were marketed to college students, sharply reducing signups for credit cards at an early age.

It’s also worth noting that the most recent data only projects current credit card debt; this could mean that millennials are using credit cards frequently, but are paying off those debts at the end of each month.

Why Credit Cards Are Still Important

The fact that millennials are wary of credit card debt is good, overall. Racking up significant debt early on can leave you victim to severely compounding interest rates, so a lower percentage of millennials with debt means a higher percentage of millennials poised for a brighter financial future. However, debt isn’t evil, and credit cards aren’t all bad—they’re still important tools for building credit with a reliable payment history, and many cards have competitive interest rates and rewards programs that further incentivize their use. So as a millennial, it’s good to remain aware of the dangers of credit card use—but don’t let yourself become afraid of it.

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