Recent studies find that 63% of those 18-29 years old don’t own a credit card, with many interviewed stating that they have no interest in getting one. Reasons given were:
- Afraid of going into debt.
- Security issues – namely, the countless credit card breaches that have taken place in the past year or so.
In the short term, sure, it make sense to not want to go into debt (or more debt if you’re among the million still paying off student loans). And to be honest, the magnetic stripe is a 50-year old or so technology that in today’s day and age is sorely outdated. So much so that in many places in Europe, they’re just about fully on chip-and-pin technology for their credit cards. It’s also much harder today to get credit cards than it used to be, and with good reason. Before the Great Recession, it was pretty easy to get a credit card. You could lie on applications about your income and no one was really checking – you could be an 18-year-old making nothing, write down that you make $40,000 USD a year, and get a credit card with a $8,000 limit.
But in the grand scheme of things, you will need to have a history of responsibly using credit cards to have a good credit score – or at least be able to significantly alter it in a short period of time … if you want a new car, house, even a job. The article does a good job balancing millennial sense with what the facts actually are. Saying that you’re afraid of going into debt and therefore you should never have a credit card doesn’t solve your main issue – which is that you feel there’s no way you can spend within your means. That lack of control will harm you whether you use a credit card, debit card, checks, cash, bookies, or otherwise. You have to fix the root of the problem rather than just taking away the toys that enable it.
Plenty of millennials believe that their debit cards are safer, but that’s just simply not true. JPMorgan Chase, anyone? In most cases once money is taken out from your checking account, it’s gone and much harder to recover than if you simply have a fraudulent credit card charge. Plus rewards on credit cards if you spend and pay back responsibly are all the rage – whether it’s cash back or points for travel. I will admit that many debit cards now offer similar rewards.
The stat at the end of the article is the most disconcerting: Of those polled, only 40 percent of millennials who do have at least one credit card pay their balances in full, compared to 53 percent of adults who are 30 and older. Three percent miss payments entirely.
So basically those who do have credit cards habitually spend more than they can pay back, learning probably from the nearly half of those in the older generation who do the same. Are there times when there is a major emergency and you have to spend more than you can afford? Sure. But I’d wager that most of those not making full payments aren’t in that boat. A credit card is a tool, which can be used for good or it could blow up in your face. Simply avoiding them because you believe that you can’t be responsible is a poor short term choice to make that could have some terrible consequences for your future. Make a budget, find ways to live within your means, stick with it, and the peace of mind that you will gain with that is worth not dropping $670 on the new iPhone if you’re not up for a renewal.
When I was buying a car earlier this year and I had the full credit score and report Ford Credit pulled on me, I was thankful that I had avoided the big shiny objects when I was younger. It paid off in a great car loan rate. Five years ago buying a car was out of the question, but as I and many other millenials on the older end of the spectrum are quickly finding out … life changes pretty quickly.