Monday, September 08, 2014

Low Credit Card Usage Among Millenials

You might be interested to read a Bankrate article at Yahoo! Finance about the low number of millenials who use credit cards.  The trend is that millenials are opting to not have a credit card at all.

Surprising?  I think so, mainly from the standpoint that the first real vehicle for me to establish credit in general was a... wait for it... credit card!  A Sears card, to be more precise.  I was barely into my 20s at the time.  However, I was very careful with it and never carried a balance.  Owing a credit card company was kind of scary, especially on my income at the time. 

In addition, as the article rightly points out, reforms in recent years have made it harder to get a credit card.  I distinctly remember grabbing a seat in the first college classroom and finding a Discover card application underneath in the basket.  And credit card applications were literally everywhere --- in the hallowed halls of academia in practically every building, with one time there being a table set up in the Caf/Student Union with a large number of cards to choose from.  This was the early 90s.  Somehow, I had resisted the immense pressure to get my own credit card.  I survived somehow on what I made working at the library during the year, the money I made over the summer, and the money my mom would send me every now and then.  Still, I can easily see from my own experience how so many young folks got lured into signing up for credit cards.

However I may understand the decision to eschew credit cards, it is important to remember that you still have to build a credit score.  A (much) younger friend and her husband were surprised to learn they had no credit score.  They had paid their own way through college.  They paid all their utilities on time.  They just never wanted to owe their souls to a credit card company, so they paid cash.  They had never had a car loan either.

Big disappointment when they learned that despite their stellar track record of paying rent and utilities on time, their plan to move forward on to the natural progression of home ownership was stalled because they had no credit score.  You still need to take the time to build up your credit, even if it means having a credit card that you rarely use, but pay in full.

Another consideration is rampant data theft.  Using your debit card (as cash) may make you feel responsible, but there is always a risk.  It's easier to dispute a credit card charge than have to fight to get a significant amount of money back.  It can take several days to have your money restored if it's stolen from your bank account.  For this reason, it may make sense to use a credit card and pay it in full each month.  I've even known folks who use a credit card, go home, log in, and pay it off right away or at least once a week.  Many cards do allow for more than one payment per month. Paying immediately after a charge will keep you honest if you're worried about overspending.

What say you?  Are you credit card free? 
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