topic Re: Millennials and credit card use in Credit Cards

Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 07:46:13 GMT

I've recently started paying attention to the card habits of friends in my age group (I'm in my early 30s). What I've noticed so far is that credit cards are seemingly heavily disfavored; even if someone has at least one credit card, debit cards seem to be used for most/almost all purchases. Basically I want to have a discussion to see whether:

This is anywhere near representative of millennials at large, and
How/if issuers should respond (and if whatever they're already doing is working).

Personally I can see a future where credit card use is very uncommon. A lot of millennials lived through the financial crisis and saw parents and other family members struggle with debt, not to mention some having large student loan debt. Those early experiences likely resulted in certain habits being ingrained early on (like debit card use over credit card use), which are difficult to change later on. Some ideas for consideration:

Adopt true chip and PIN for credit in the style of Diners Club, UNFCU, etc. I've lost count of the number of comments I've read/heard regarding how chip and signature is "useless", which makes me think there is a risk of people beginning to consider debit cards as "more secure" than credit cards (due to being heavily encouraged/required to enter a PIN at some/most stores)--potentially making adoption of credit cards more difficult.
Charge cards. AmEx has a pretty big opportunity here, IMO, as the only issuer of charge cards (that I know of, anyway)--it's just that people are reluctant to pay AFs. A charge card without an AF may do pretty well since it's impossible to go into debt with those. Alternatively, something like Europe's "delayed debit" cards might work too, though I'm not sure how viable those would be.

Thoughts?

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 08:00:30 GMT

I am 30 and had a bankruptcy in 2013 due to getting completely overwhelmed by helping my mom by putting a lot of debt on my cards. I also did eat out a lot, which didn't help at all. I got my first card since chapter 7 last year (Amazon store card), and since then, my husband and I have gotten 13 more cards all together (we're finally gardening). For him (also 30), credit cards make him nervous. They don't cause him to spend more, but he doesn't like to manage them. I have learned a lot from my bankruptcy and only put stuff on them that we can pay right then and there. I use them for rewards and cash back. We have gotten over $1,000 from rewards, referrals, and signup bonuses in the past year.

I think millenials would warm up to credit cards if they knew the perks they can provide if used as a debit. Debits can still be charged as credit, so I don't feel they are necessarily more secure. When I changed my mind set and only charged what I could afford and PIF right away, everything changed and credit cards are a way we can save more money. It is interesting to think what CCC could do to encourage more millenials to use credit over debit. For me, just the cash back and rewards are enough for me.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 08:41:09 GMT

I do remember reading an article somewhere that said that millennials are shunning credit cards a lot more than older generations. I'm in my mid 20's and haven't used a debit card at all since having credit cards. Credit cards require a bit more self control than debit cards but the rewards and fraud & purchase protections make them a no-brainer to me.

ETA: It was an article on Bankrate.com.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 09:24:00 GMT

Have you noticed any correlation between friends who use debt cards and have no/little liquid cash savings? Exclude 401K, IRAs, and other investments.

The ones I know who use debit cards more often do not have an emergency fund. Perhaps without a backup source of cash to pay off a credit card completely just in case, they rather live within their means of paycheck to paycheck.

Or it could be they have racked up credit cards that are SD'ed until they pay them down and are left without only a debit card to put daily spend on. Lots of 0% BT offers floating around where someone is paying the bank interest after the introductory period.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 09:34:51 GMT

Interesting thread OP. I'm looking forward to reading everyone's post.

Re: Millennials and credit card use

r34dy2fly — Sun, 16 Oct 2016 10:02:18 GMT

I'm in my late 20's and I'd say between my friends, it's equally balanced. You have your financially savvy people who make use of all the perks of having a credit card. You have far more fraud protection using a CC as opposed to a debit card. You get cash back, etc etc. I also have friends who just... don't get it. They primarily majored in some form of arts program and anything finance just makes their heads explode.

I don't think its really a generational thing. I think it's more of a financial literacy thing. Maybe our generation just has more liberal arts majors than previous generations. Maybe no one taught them how to budget a check book. I don't know exactly. I will say though that overall, almost no one has a sizeable savings. Everyone is too busy paying off student loans or they just majored in something that doesn't pay out monetarily. I'd say only a quarter of my friends have their financial act together with a 401K, IRA, and have decent savings.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 12:03:48 GMT

31 year old here and I never use my debit card. I use my credit cards for everything then pay them off at the end of the month. The rewards are I my favor. Last month my rewards totaled around $90. I look at that as extra money in my pocket

Re: Millennials and credit card use

Sharingan — Sun, 16 Oct 2016 12:27:39 GMT

I'm in my mid twenties and I prefer to use a credit card for most of my purchases. The thought of using debit at a gas station or for dining makes me cringe for a number of reasons. With fraud so rampant, I'd rather deal with it on a credit card than with my own bank account/debit. Additionally, I'd be giving up 5% at the pump if I chose not to use my PenFed Platinum Cash card, or 6% on groceries if I didn't use a BCP. That is quite an opportunity cost just to use debit... Quite frankly, I don't mind at all if other millenials choose not to use credit. That just means the banks will continue competing aggressively for our business, and I will just continue to enjoy the rewards and bonuses offered.

As for the OP's second consideration, there are other banks with charge cards; however, they have AFs as well from what I can see. The challenge would be combining a competitive reward structure with $0 AF, as there wouldn't be a steady flow of interest for the bank to defray some of the rewards disbursements. Such a charge card may work well for customers but would probably perform quite poorly for the bank. The American Express Zync card (which I still have to this day) was AmEx's attempt to compete in this segment and it fell flat. The AF started as low as $25 and increased as the user added more rewards to the card in the form of "packs." I doubt you will see AmEx introducing a no-AF charge card anytime soon.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 12:42:04 GMT

Fast approaching 30 here myself.. I think there are two groups in my generation.. There are the ones supporting themselves (which is a lower percentage than any previous generation by this age), and the ones that aren't. Of the ones that are supporting themselves.. there are few of them to begin with and things are pretty tight for us. Many are afraid of credit cards because of seeing others fail with them or just being told that cards are bad. Others don't understand credit and stop trying after a couple denials for cards they werent eligibile for. Others still have already rang up debt they are still paying for and are reluctant. Some of us though are financially conservative AND use credit card rewards as another tool to save money. As for the ones still getting help from their parents (which I believe to be A LOT), they simply don't understand the value of money and don't care. It's sad, but most people my age really don't seem to have a clue about finances.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 12:54:37 GMT

I am also 30 and my fiancé is 31. I would have to say for my group of friends (and my fiancés as well) it's the opposite, all, including myself, use our credit cards rather than our debit and PIF when it hits. I don't even carry my debit card with me at this point. I had some fraud issues at one point, and while PNC did fix it, it took longer than I would have liked. I am also rebuilding my credit from some hits that happened to me when I was with my ex husband, so using my credit cards is beneficial to me.

As a side note I love reading the responses on this post!

Re: Millennials and credit card use

r34dy2fly — Sun, 16 Oct 2016 13:00:30 GMT

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.

Re: Millennials and credit card use

CleanCredit — Sun, 16 Oct 2016 14:34:17 GMT

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

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 14:40:16 GMT

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.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 14:48:00 GMT

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.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 15:00:07 GMT

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.

Re: Millennials and credit card use

Dalmus — Sun, 16 Oct 2016 15:12:50 GMT

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.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 15:35:58 GMT

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.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 15:37:09 GMT

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!!

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 15:45:32 GMT

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.

Re: Millennials and credit card use

Anonymous — Sun, 16 Oct 2016 16:01:10 GMT

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