How Millennials Became Spooked by Credit Cards

Parent Cafe
101

My kids have never paid interested or late fees to CC companies. The few times they were assessed, they requested a waiver, which they received. Both got CCs as authorized users when in college and CCs in their own names around age 20-22.

Both enjoy the signing bonuses, cash back and other benefits of having their own CCs. Some CCs have extended warranty protection and other benefits both kids have enjoyed as well.

Neither has ever had problems avoiding racking up debt. We live below our means and both our kids do as well. Our kids are fortunate, we modeled living below our income all their lives.

Our S has a ton of CCs, all of which he uses responsibly. He’s contemplating buying real estate and has great credit.

102

It is very hard to do things in this world without a credit card, hotel rooms, rental cars, and so forth are very hard to use cash for. Yes, there are electronic services like Paypal you can now use at stores and such, and you can link that to a bank account (though most people seem to keep it with a credit card), android pay and apple pay are linked to cards, so you still need a card for them, either credit or debit, that they debit. They are a bit safer, since the merchant never knows your credit card number, and the only risk is if applepay or android pay or pay pal get hacked.

Cards offer a lot of benefits, extended warranties, travel help if you run into trouble, assistance, cash back , points and so forth are some of the benefits. And yes, in an emergency, if your car suddenly needs a 2000 dollar valve job, or you otherwise have an emergency, having the credit reserve is not necessarily a bad thing (note I said emergency), when you might not have the cash on hand to get the car repaired.

I think Millenials have a healthy skepticism about cards, maybe because credit card companies for so many years ‘hooked’ kids in college with easy credit and then the kids find out the costs, and that is not a bad thing. However, it also is kind of short sighted to overlook the convenience of cards, despite all the shortcomings, the ease of using a card (which is also a downside) makes it a tool, as long as you are buying stuff you have the funds for, or have a specific plan how to pay it off if you don’t have enough.

In terms of the security of cards, that is another matter, the credit card companies in many ways are in the 20th century and so are merchants. Things like the 3 or 4 digit number on the card (which often isn’t as easily hacked) can help protect online purchases, yet a lot of places don’t use it. The embedded chip, once stores have the readers and use them, will cut down if not eliminate fake cards created by ‘swipers’, since when you scan for card info that chip’s data is not crackable or is very difficult. Obviously, the 3 or 4 digit code won’t help if someone at a store or place of business copied down the information, but most hacking happens online and that data from what I know is not stored. Not to mention that banks and credit card companies still have sensitive information in readable form, which is an open invite to hackers, too.

I am very proud of my son, he has cards on two of my accounts, because between if things need to be fixed on his instrument, or when he needs to travel, we felt he needed that, but he has never abused it and is reluctant to use them unless he absolutely needs something. We had one brief interval when he was first dating someone where he went a little over the line, but other than that he has been responsible, and when he gets his own cards he likely will be just as good,he understands that isn’t free money.

103

I use my debit card for everything - airline tkts, rental cars, groceries, eating out, etc., etc. I’m liable for the same $59 as I would be with my credit card. I rarely put anything on a credit card except big purchases where I want the protection if I get a lemon. I’ve never had a problem with debit card and fraud and I’ve been using one for at least 15 years if not more. I did lose it twice last fall and once I realized called my bank. I told them the last time I used it and they confirmed that to be the last time. Cancelled card and they sent me a new one.

I check my account every morning so know exactly how much I have in my checking account and what has cleared.

I have nothing automatically withdrawn. I have to initiate paying the bill online.

S got his first CC after he graduated and started working. I suggested no more then a $1000 limit. As far as I know he pays his bill in full every month.

104

We pay for almost everything with credit card and pay balance off every month. We get perks from our card so, why not? Also, we have had our debit card compromised more times than our cc.

S is a millenial without a credit card but that may change. Today, his credit union called to say there was suspicious activity on his debit card and they had shut it down before speaking with him. He uses it for everything. This is the second time its happened and now he’s considering applying for a credit card.

105

@lilmom wrote

I don’t think anyone here has an issue with that (we do it to get frequent flyer miles).

It’s revolving unsecured debt that’s a problem.

106

@MotherOfDragons, I agree the revolving unsecured debt can be a problem. DH and I have been there. The first 5 years of our marriage was spent paying off student loan, juggling credit card bills and car payments. It wasn’t until we sold our first house and made a nice profit that we were able to dig ourselves out of that hole. We learned our lesson early.

107

Not necessarily, Especially if you have a Visa or MasterCard debit card, they have many of the same protections that a credit card does. I was the victim of identity theft with my Visa debit card a couple years ago and the charges were reversed and money back in my account within weeks. It’s not the same as cash.

You can also easily get hotels, rental cars and airline tickets with debit cards.

I actually don’t think most people use credit cards responsibly. Some do, but not most.

Also - there’s a lot here about parents teaching millennials to be responsible and stuff, but remember too that most parents themselves are not financially savvy and a lot of the risk-aversiveness that some millennials experience might be due to watching our parents crash and burn with credit, especially if we grew up in working-class or lower-class households. My parents were working-class, and they did not teach me responsible money management. I had to learn on my own. They also did not have the credit and the money to put me on their credit cards as an authorized user to practice with some guidance, so the first time I had a credit card was when I got my own at age 18, with no guidance.

Most of my friends and I are first-generation students and we make more money than our parents did even in our first jobs out of college, many times, so we had to learn on our own. That’s the case for lots and lots of millennials.

I’m pretty debt averse, myself. I’d rather buy things in cash than use a credit card.

108

However, your money was missing for those weeks, right?

109

One day, these Millennials are going to want to purchase a house or rent an apartment. Buy a car. They need solid credit scores to: (1) get approved; (2) get best rates. To have a good credit score, they need a record of credit transactions. Credit cards are the single best source of transaction data.

Treat the credit card as a digital payment method. Getting coffee at Starbucks? Charge it. Buying groceries? Charge it. Public transit? Charge it.

Charge the things one would normally pay via debit or cash. Don’t go crazy, just use the credit card as an easy payment method. Then pay off with the cash one has since it wasn’t used to purchase things.

A solid record like this builds a credit record, and better scores. Valuable when it comes time for bigger transactions one will have down the road.

110

^^Well thanks for that tutorial. Eight pages in and it’s a revelation! :-w

111

I agree with establishing credit. We had to cosign a lease last year because 3 of our daughter’s roommates had no established credit. They thought you could just get a credit card and never use it and it would still get you a good credit rating. They had no credit rating.