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Getting credit card at young age associated with more responsibility.

I know I'm going to get attacked for saying this but I don't really care. I actually think the people who get credit cards at age 18-20 have better impulse control genetics than those who get their first credit card at a later age range like 25-30. Those that wait it off, I believe either don't give much attention to credit or have been avoiding them(wise decision) because they know they are too impulsive. However those that get them at young ages display more planning and more financial responsibility than those that just wait it off.

 

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As we can see, the most common reason to get a credit card is to build credit so we can assume that those getting credit cards are the more responisble population trying to build up a good score.

 

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Although it is known that credit scores generally increase with age, such trend is not really shown at early ages. The freshman who get credit cards are more responsible than the sophomores who are more responsible than the juniors who are more responsible than the seniors. Also the 18-24 year olds are more financially responisble than the 25-34 year olds. I believe it is due to impulsive 25-34 year old people that have no interest in building up credit score finally getting their first card. 

 

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I believe the Credit Card Act restricted the Student credit card population to only those who were financially responsible. Before the Act, impulsive people would get credit cards after seeing a campus offer without doing much reseach. After the act, those who get credit cards are those who do more research and find quality cards before applying.

 

I am fully aware a counterargument would go along the lines of "Worsening scores around 30 aren't neccessarily due to irresponsible people getting cards because as people get older they have more expenses that put them in more debt". While that probably does play a role, I don't think it can account for the whole disparity.


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Re: Getting credit card at young age associated with more responsibility.

The CARD Act requires consumers under the age of 21 to either have a parent cosignee or to demonstrate their own financial responsibility.

I would assume that the graphs include those 18-21 who also have a parent cosignee, which would itself likely lead to reduced debt accrual.

 

I would be wary of any general assumptions as to increased responsibility of the student/minor; it is likely based on more control inherent in having a cosignee...

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Re: Getting credit card at young age associated with more responsibility.

There are some broad brush strokes in the argument made. This isn't to dismiss the facts intertwined in there, but to associate the desire to build credit with impulse control? Yeah, no.

 

For one, balances are a poor indicator of responsibility, especially when we're talking about balances in the hundreds of dollars. Freshmen have one-fourth of the balance as a senior, and 18-20 have half the credit card debt of 23-24 year olds. Does this mean that seniors are less responsible, or maybe just that they carry higher balances, which may be due to anything ranging from more living expenses (apartment instead of dorm, etc) to they're planning to enter the world of adulting and have more expenses associated with job hunting/etc? What about a 30 year old or a 50 year old who carries a balance? Maybe they had an emergency that was beyond their means at the moment. Maybe they have a 0% offer running. Not enough info to jump to the responsibility conclusion here, as much as I'd like to sometimes.

 

It's good to get a head start on building credit when you can, where you can, but it's not an end-all-be-all metric of...well, anything. I am aware of no credit doors that close at 25 years of age, or 30 years of age, or even 60 years of age. The system is such that anyone..anyone....can go from nothing to good enough to be approved for a mortgage, credit card, or even car loan in a matter of a few years.

 

Also just as important is that credit isn't a race. There's no prize for getting a credit card or a score of 800 before 25. If you want to show everyone how responsible you are, save and budget responsibly. A 30 year old who has 4-5x their income socked away into 401ks and savings is far more responsible in my eyes than any 30 year old who thinks they're hot stuff rolling down the street in their M4 they're paying half of their paycheck toward every month. What's more, the kid with the savings may well have a lower credit score than Mr. M4 because he isn't running around getting credit so much as he's running around saving for the future.

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Re: Getting credit card at young age associated with more responsibility.

[ Edited ]

Highly recommend taking an Intro to Sociology class and keeping an open mind about what's presented.

 

The genetic argument falls flat on this in my opinion.  Credit card use is down across the board for millenials at least for other stats which are being posted here, and suggesting cognizance of impulse control issues is a little awkward (as not getting CC's due to that suggests they actually have impulse control), and the elephant in the living room of course is the mortgage crisis... given every generation is shaped by major events, do you doubt this influenced the current college students?  Children are certainly influenced by their parents at some level, and so this can't be discounted.

 

Data on the behaviors and path through the mortgage crisis of the parents would be a minimum level of additional detail to even hope of being a useful study in my opinion.

 

Suggesting you're going to be attacked for an opinion though, can we please stop with that assertion?   People will disagree on the Internet and in the office and in the classroom, and that's part and parcel of a healthy conversation even here.

 

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Re: Getting credit card at young age associated with more responsibility.

When I was in college I had two credit cards which I never used as they only had 500 dollar limit.  Once I graduated I got a new car through a college graduate program and then I started receiving credit card prequalify letters in the mail daily.  In 6 months I had 140k of limit in my pocket.  I don't think 1000 dollars of credit prepares you for having basically unlimited credit.  

 

Student loans are about the worse thing you can get.  If you ring up 200k of credit card debt you can declare bankruptcy or disappear for 3 years and you are off the hook. Student loans will follow you forever.   Luckily I worked 35 hours a week during college and went to public college so I avoided that racket.

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Re: Getting credit card at young age associated with more responsibility.

[ Edited ]

When I was in school my parents cosigned for a credit card for me, which ended up having a limit of $1000 or so. That was a lot of money for me and my summer job paying minimum wage so I promptly maxed it out, and then it took me months to pay it off. Really months.

At the time it seemed like a huge problem but really I was in a safe place living at home and the only consequence was it cramped my ability to buy more clothes and albums and concert tickets and whatever it is teens spend money on.

I learned my lesson the hard way at a time when there wasn't really too far to fall. Never paid a dime of interest on a credit card since. Pay in full every time without fail.

So I agree with post 1 but you want to make sure the limit is lowish and the responsibility for repaying it lies with the new borrower. Can't cave in and pay it off on their behalf. Gotta let them burn their fingers.


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Re: Getting credit card at young age associated with more responsibility.


atomicfront wrote:

When I was in college I had two credit cards which I never used as they only had 500 dollar limit.  Once I graduated I got a new car through a college graduate program and then I started receiving credit card prequalify letters in the mail daily.  In 6 months I had 140k of limit in my pocket.  I don't think 1000 dollars of credit prepares you for having basically unlimited credit.  

 

Student loans are about the worse thing you can get.  If you ring up 200k of credit card debt you can declare bankruptcy or disappear for 3 years and you are off the hook. Student loans will follow you forever.   Luckily I worked 35 hours a week during college and went to public college so I avoided that racket.


Not being able to get out of a debt via bankruptcy doesn't make something bad. Getting oneself in a situation where one has to file bankruptcy is the bad thing. 

 

Student loans are one of the few loans that actually make good financial sense, provided the interest rate is reasonable (less than 6%) and the resulting purchase (the degree) is something one can put to work to earn more income. If the degree allows the individual to earn a million dollars more in his/her lifetime, it will have paid for a $100,000 or even a $200,000 loan at 6% many times over.

 

Compare that with a car loan, where even at 1%, you're paying interest on something that lost equity as soon as you sat in it and started the engine. Even many homes are break-even or worse after you factor in mortgage interest, repairs, improvements, and the like.

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Re: Getting credit card at young age associated with more responsibility.

If all you are going to be earning is a million dollars in your lifetime you better not have 100k in student loans.  200k in student loans is crazy unless you are going to Med School it is going to be extremely hard ot pay that back even at low interest rates.  There is no reason you should have 100k for undergraduate.  State Colleges are less than 10k.  So that is 40k.  Why would you not work while you were going to school to pay some of the cost?  There also highly paid jobs that don't require a college degree like Electrician or Plumber.  

 

And bankruptcy can be a situation that you could be facing.  Medical issues, Job loss or Divorce can lead to such situations.  

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Re: Getting credit card at young age associated with more responsibility.


atomicfront wrote:

If all you are going to be earning is a million dollars in your lifetime you better not have 100k in student loans.  200k in student loans is crazy unless you are going to Med School it is going to be extremely hard ot pay that back even at low interest rates.  There is no reason you should have 100k for undergraduate.  State Colleges are less than 10k.  So that is 40k.  Why would you not work while you were going to school to pay some of the cost?  There also highly paid jobs that don't require a college degree like Electrician or Plumber.  

 

And bankruptcy can be a situation that you could be facing.  Medical issues, Job loss or Divorce can lead to such situations.  


How do you find time to work that many hours?


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Re: Getting credit card at young age associated with more responsibility.

 


atomicfront wrote:

If all you are going to be earning is a million dollars in your lifetime you better not have 100k in student loans.  200k in student loans is crazy unless you are going to Med School it is going to be extremely hard ot pay that back even at low interest rates.  There is no reason you should have 100k for undergraduate.  State Colleges are less than 10k.  So that is 40k.  Why would you not work while you were going to school to pay some of the cost?  There also highly paid jobs that don't require a college degree like Electrician or Plumber.  

 

And bankruptcy can be a situation that you could be facing.  Medical issues, Job loss or Divorce can lead to such situations.  


I think you misunderstood both of my points.

 

If one uses a student loan to earn a degree that increases one's earning potential by a significant value, the cost of the loan is more than returned in the value. Nobody said a million dollars in a lifetime, but I did say a million dollars *more*. If the degree obtained via 100k in student loans allows one to earn 3 million instead of 2 million in a lifetime, it's a good investment.

 

As for my second point, it's well understood that sometimes bankruptcy is the best/only option in a few circumstances. When it does happen, nobody should be upset that they can't discharge certain debt; they should be upset they made decisions that made it necessary at all. It is intended as a means of relief from insurmountable debt, not an escape from it altogether.

 

Nobody should ever worry if debt can be discharged when in the process of obtaining it as it implies forethought of avoiding repayment.

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