Millennials and credit card use

[r34dy2fly]

Trying to battle fraud with debit card is just painful. Especially since the monetary amount is taken out immediately. Screw that noise. 

I try to tell all my friends to convert them over to the CC world so they can get some decent benefits and rewards but... some just... aren't about it. I tell them they're practically throwing money away when its obviously they need every penny but they just don't want to hear it. I'll probably write about it for my dissertation for post-grad for behavior finance and discuss why they're so opposed to it. 

[CleanCredit]

I'm 24 and within the past year I've started to use my credit cards nearly 100% of the time. I have self discipline and never put anything on it that I can't pay right away. However, I have friends who don't even have a credit card and simply use cash or debit card. To each their own I suppose

[Anonymous]

I think it will come around over time. DW and I are both 31. I picked up a credit card shortly after graduating college, but I was an engineer who transitioned to finance. My wife, on the other hand, didn't pick up her first credit card until about 18 months ago, when I pointed out the advantages. She's very concerned about going into debt, because her parents have debt issues and so many of our generation do. However, we both spend well below our monthly paychecks, so we don't actually accrue any debt on the cards and we need her to have a report so we can buy a home. 

Generationally, I see a few issues:

1) Few of our generation were really taught financial literacy. Most were either handed everything by their parents or had to watch their parents scrap for everything. Neither is great for encouraging credit card use.

2) College costs have skyrocketed far faster than anything not named healthcare (and I don't know about that one). It now costs a lot more to get an education than it used to and, coupled with the continued push to make everybody college educated, means that people are taking on much more student loan debt than they used to. Just seeing how much you owe makes you less likely to open yourself to the possibility of more debt. 

3) While the jobs market is improving, it isn't improving equally across generational lines. Many of the older generation are working well past when they were expected to retire. This means that the entry level jobs that millenials were expecting upon graduation just aren't there. No jobs makes it hard to consider getting a credit card.

4) Real estate, especially in states like California, is a mess. People have, for decades, treated a house as an investment that could only increase in value. This involved using mortgages that involved very little cash down and lots and lots of debt. Home prices going down at all is going to severly impact supply and demand in the real estate market. Why do I mention California? Because they have a law that limits increases to property taxes until you sell. Therefore, there isn't much turnover in real estate, because as soon as you move, your tax bill massively increases. All of this has an impact on credit card use, because the desire to buy a home encourages people to get credit cards and build a credit profile. Without that, you have one less reason to get a credit card.

All of these are likely to pass over time. However, it might take another 5-10 years before things might be able to right themselves. I'm also not sure if the jobs issue is ever going to get fixed. As the boomers either retire or die off, younger people will be able to enter the workforce. However, the damage done to their savings might take decades to fix, meanign that each successive generation is goign to have to work just as long as the boomers did.

[longtimelurker]

And: heresy alert:  for many people,the advantages of credit cards isn't ALL that huge.   Rewards on modest spending are very modest, yes, there are better protections but the need isn't an every day occurrence.   Simply not worth the bother if you aren't all that interested.

[Anonymous]

As a 27-year-old I've noticed a lot of people around my age being distrusting of the system in general. I know some that waited years just to create a bank account because they didn't want to tie themself to a financial institution. I think coming to age at the peak of the financial disaster in 08 caused quite a few millenials to want as little interaction with credit as humanly possible.

[Dalmus]

My experience among my own friends is that the people who use debit rather than credit are either in financial trouble already, or no little to nothing about how credit, banks, 401's, etc work.

My fiance is 31, and very intelligent (DNA analyst for the state crime lab). But financially, other than knowing not to carry a credit card balance, she's not educated at all. She prefers debit cards (although she has two very nice high limit credit cards), and it's an exercise in maintaining great patience having a conversation about retirement funds, investments, insurance and things of that nature.

I gather from various conversations that public schools just don't teach basic financial skills anymore like they used to in Home Economics. So many people's only knowledge base is watching their parents and friends.

[Anonymous]

I'm 28 and I haven't used a debt card since I started rebuilding my credit 4 years ago. Honestly I think this relates a lot to the difficulty of getting credit over the years following the recession when my friends and I had essentially zero history, or worse, limited and BAD credit because we didn't understand it well enough when we were offered thousands of dollars in cards pre-recession with no job, at 18 years old. Since things have gotten a little better (and I imagine since collections are now coming off), I've noticed that my friends have started to use credit much, much more over maybe the past 1 to 2 years. Before that, you had to play the game more and put in a lot more effort to figure it all out and get what you wanted from it. Now you are likely to get something like a basic travel card offer in the mail and take another shot at the whole thing. I don't think we'll ever be as likely to just put things we want and can't afford on a card a 20-30% interest as previous generations, but I think credit card usage will go up significantly with milennials, especially if offers are more generous to get us in.

[Anonymous]

Just had this conversation last night at a group dinner. I myself am 30 and my group of friends range from about 26-34. Out of 11 people last night st dinner 3 including myself utilize credit cards for their perks and safety. The people who only use debt cards use it because they are not finically stable, no steady income, or are digging themselves out of debt and lack of education around personal fincaies and savings along with blown credit and scored under 580.Not to turn it political but the liberals and ultra liberals also stated they don't trust big banks and don't want to support them. 9 of us are taking a group trip to Mexico as well and just two of us are able to float the balances for the trip on credits. FYI my flight and my SO are both covered by points! Her and I will be traveling first class thank you points!!

[Anonymous]

I don't think it's just liberals that have a strong distrust in banks. I am a libertarian, raised as a Republican.. and it's hard for me to trust our banking system or gov't as well.. I've also got a pretty diverse group of friends and family.. very few trust our banks since the fraud and bailouts. To me, credit cards are my way to 'game' the system and get some rewards.

[Anonymous]

LikeI said not to make it political, but that's what the 4 liberals and ultra liberals said. Obviously their opinion isn't the only opinion nor is it correct or wrong-it's their opinion. Just passed the message on from my conversation last night. I personally do feel at as a millennial who have been given the shirt stuck due to banking fraud, mortgage crisis and a few other issues from banks. But for me overall I feel that it's Safer to use my cards; -!: obviously take advantage of the points, rather than have my checking account wiped dry by a fraudster who cloned my card. And taking advantage doesn't mean manufactured spending or churning. In my household alone we out about 35k a year through credit cards. Between groceries, gas, utilities, restaurants and travel. So why not use cards and earn those points and cash back?

Sorry multitasking this morning and using my iPhone to type