Credit card debt among Americans under 35 has fallen to its lowest level since 1989.
http://www.nytimes.com/2016/08/15/business/dealbook/why-millennials-are-in-no-hurry-to-take-on-debt.html
Neither of my millennials have a credit card.
Both mine do… but they pay them off. I think millennials have learned from their parents’ mistakes. Smart kids.
It blows my mind that people use debit cards instead of credit cards. Debit cards are just so unsecured and you’re basically SOL if there’s fraud.
I understand millenials being debt-adverse but I think that the vast majority of people use credit cards responsibly. I’ve had credit cards since I was 16 (got in just before the 09 reforms) and I’d never carried a balance until a few months ago (medical bills… not accumulating debt since I have a 24 month grace period). I have a credit line nearing 6 digits and there’s no doubt in my mind that that helped me get the mortgage that I have at a relatively young age and at a great rate.
Credit cards have bailed me out more than once as someone with volatile health issues and who travels a lot. My mom was a banker so I have had responsible use of debt and money drilled into me since the cradle.
I understand not wanting to take on debt. I don’t understand the aversion to credit cards. I think it will bite many people of my generation in the behind if/when they want to buy a house, buy a car, etc.
ETA: I was a junior/senior in high school when the market crashed (graduated in 09). I saw my friends’ parents lose everything. I had more than one friend who couch hopped so they could graduate at our high school after their parents lost their homes. Classmates had to radically change their college plans at the last minute. So again, I get the debt aversion but I would think we could teach young people how to use debt responsibly. shrug
@romanigypsyeyes I agree, but I think a big part of it is parents simply not wanting to deal with their kids having the ability to put things on credit. I think the mentality is really just “wait until they get older” and having a credit card is not really something which you HAVE to learn how to do when you are young. (=
It is not surprising that there is a swing to this extreme. Like all things, credit can be used wisely and in moderation. Being debt free is a good thing though, when you can manage it.
@romanigypsyeyes, the average American household has more than $15,000 in credit card debt. That is NOT using credit cards responsibly, IMO… and I think millennials, who came of age during the Great Recession and may have their own college loans to contend with, are simply reacting to this ugly reality.
@kataliamom ok point taken- but the 15k number is misleading: http://time.com/money/4213757/average-american-credit-card-debt/
Even still, I think people can use credit cards responsibly. I don’t think the answer is just to not use them at all. IMO, it’s very risky to not have a safety net like a credit card (if nothing else). Not all of us have family which could help us out if we were in a pinch.
Sure, credit cards can have their benefits if used wisely. However, I think one can do without them without adverse effects. I think you can build up a cash reserve in lieu of a credit card for a safety net, for example. That is something we’ve already pounded into our kids.
Increasingly, I think credit cards will become a less important piece of the monetary system with other means of charging purchases e.g. venmo, apple pay, etc. With these changes and the fact that homeownership is declining and become less of a factor in people’s financial pictures, credit scores will be less dependent on things like credit cards as well.
http://www.creditcards.com/credit-card-news/credit-card-debt-statistics-1276.php has the following:
42.1% of card accounts carry a balance
29.7% of card accounts pay the full bill every month
28.1% of card accounts are dormant
Average debt is $7,494 for cards that usually carry a balance, and $1,128 for cards that are paid off monthly.
What people think is “responsible” use of credit cards may be a matter of opinion.
Of course, for people who do pay the full bill every month, credit cards have significant obvious advantages over debit cards for Visa/MC purchase transactions.
Hotels and rental cars may be more difficult to get without credit cards. As noted above, use of debit cards for Visa/MC purchase transactions has greater hassles when fraud hits.
A good cash-back card paid in full every month is a very useful tool. I hope to teach my own kids how to use plastic wisely.
I think your points about hotels/renal cars is very valid right now, @ucbalumnus. My guess is the hotel/rental car business will change at some point given the changing nature of financial transactions. In some ways, it already has. With airbnb, uber, zipcar, the newer Enterprise carshare, one doesn’t necessarily need a credit card now. I guess my point is that the model is morphing and what we grew up with and consider a necessity will likely be changing.
Agreed, @snarlatron. For years we used Discover, and would get back a good $500-$800 per year. We’d always use that money on a fun splurge: a trip; an amazing dinner out, new skis. It was fun figuring out what to spend that money on.
Then we switched to a mileage card; my daughter went to school across the country, and it was great having free flights for her to come home on.
@romanigypsyeyes – the average HOUSEHOLD credit card debt is about $15,000 – the average American’s is obviously less.
But I understand your point. RESPONSIBLE use of credit cards offers many advantages. But many (if not most) people lack the self discipline to use credit cards wisely. It’s good to see millennials use them differently.
I have multiple credit cards. I use them to pay for everything. They fund quite a bit of my entertainment every month due to rewards and cash back. I don’t carry a balance. I never have cash. And I never use my debit card unless I need cash from the ATM.
There’s nothing wrong with responsible use of credit.
Is it possible to book air travel these days without a credit card?
Itsgettinggreat - if you aren’t carrying a balance and paying off that month’s statement in full every time, then you aren’t USING credit – even if what you are putting it on is called a credit card. Of course there is nothing irresponsible about that!
Aside from young people just getting started who are buying absolute necessities, and situations such as health or other emergencies that simply have to be addressed even if you don’t have cash on hand, what “responsible use” of credit can there possibly be?
And I’m with others - I don’t possibly see why one would ever use a debit card versus a credit card paid off every month. Why I’d want money withdrawn in the moment (thus leaving me no protection) versus at the end of the month (and having protection if I’m not satisfied with the merchant) beats me.
Yes it is possible to book air travel these days without a credit card. And I rented a car with a debit card last summer.
Agree, using a credit card (properly) just makes long term financial sense.
I am not much of a cook, and my house is pretty not-clean (and furry, from my creature), but I spent a lot of time and effort overseeing and educating my kids about credit vs debit card use. As a result, S is about to close on his first home at 25 (he is single, and with a very unconventional profession that doesn’t pay all that well right now, at least) because his credit score is around 820. He didn’t have student loans or really any other debt other than a long history of proper credit card use to bolster his credit.
When my brother just got out of college, my dad took him to get a credit card so he could rent his first apartment. But he also took me along, as a 19-year-old, to get one as well, because my brother was going to have a hard time due to not having any credit, and he didn’t want me to be stuck in the same position.
In the past two years, I would say I’ve been incredibly responsible with it. I set strict budgets for myself that are well below my credit line, and I check my bank account at least once a week. I’ve never missed a payment either. I’m honestly glad to have it.