Millennials are using fewer credit cards, but more credit. Why is that?

In a recent article from the financial post here, they talked about some statistics regarding Millennials. An interesting fact from the article is that “Just one out of three Millennials carries plastic, according to a Bankrate.com survey, compared to the majority of older Americans”, and that “the 18 to 24 demographic preferred to pay cash more than others”.

 

In the article, many financial experts offer their explanation as to why this may be the case. One expert, Erin Currier, suggests that it may be due to their experience with the financial crisis of 2008, just as the millennial group started post-secondary or their working career. Because of this, she says, “they’re very sensitive to this life experience.”

 

The article also offers an alternate explanation, citing the fact that the millennial generation tends to carry a lot more student debt. Nearly 41% of Millennials had some student debt. Compare this to the Gen Xers who at their peak had 26%, and baby boomers at 13%.

 

Lastly, the article mentions that the decrease in credit card usage can also be due to the laws limiting the marketing of credit cards on campus, resulting a lot of young adults switching over to debit cards.

 

Now, a very interesting fact that popped was the fact that even though millennials are less likely to use credit cards compared to the older generations, they are using more auto-loans and personal loans, as a personal line of credit. What this may suggest is that millennials aren’t really of using credit, they’re just not using credit cards, for whatever reason.

 

Another explanation that I’d like to offer is that debit card companies have been doing a huge marketing push to encourage the use of their system rather than credit cards. They’re particularly playing up the fears of having credit, although I believe that is largely needless since it appears that Millennials aren’t afraid of debt. Otherwise, would they be the group to take on historically the high usage of student loans?

 

 

 

 

Additionally, university campuses have also begun to restrict financial institutions from setting up booths and tables to market their credit cards, which can be a good thing, as unfortunately, most university students haven’t had a chance to be well versed in using credit just yet. What happens though, is that these young adults end up opening up personal lines of credits, and uses them just like they would a credit card anyways.

 

As always, the main takeaway here is that there is good debt and bad debt. Credit is just a tool to be utilized.  It all comes down to how credit is used. Used properly, it can bring a wealth of opportunities. We strongly recommend doing research and talking to respectable professionals to find out more about credit and associated products, so that you find the best choice for you, regardless of your age.

 

 

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