Millennials and credit card use

[yfan]

I'm a millennial, but I'd say my group of friends is fairly varied in age. Still, although I see most of my friends using credit cards, I'm nonetheless aware of research showing millennials having fewer credit cards. One factor is simply age/stage in life. Another is the Great Recession, but I don't think the fear of another recession is the major factor here. The recession screwed up a lot of people's credit, and it affected millennials - people who were just beginning to spend/go to school but did not have any money yet - the most. That means a lot of delinquencies, bankrupcies, etc. Most people aren't as credit-savvy as people here, and don't bother trying to clean their credit reports. Which means a wait for items to fall off their reports.

The other problem is that cash is often a requirement in young people's life in the way credit cards are not. Most people don't tend to use a card at a bar or club even if they take it. You get a drink, you pay for it in cash and leave a dollar or two for tips. So If you are going out for a day with friends, and your plan includes a morning hike, followed by brunch, then a movie, dinner and club hopping, and you want to only bring one card with you, you bring your debit card, since it allows you to pay as well as withdraw cash at an ATM.

Despite CSR's relative success, I don't see ramped up rewards as the only or even main way to attract millennials. I would say they may be more attracted to low interest rates since they already have high interest debt. Chip and PIN may be a way to go. Perks could be important as millennials tend to be experiencial people.

I think if banks were able to do some innovation, it would help. What if a bank could create a card that was both a credit card and a debit card (linked to the user's bank account for debit), and was smart enough to figure out what function to use when. At an ATM or a termnial which doesn't take credit, use debit function. At terminals that take credit, use credit. Default online/mobile purchases to credit. Then offer a feature to autopay the credit portion from the linked bank account so the user doesn't have to worry about going into debt.

[Anonymous]

My daughter is 5 (6 in June) and I cant wait to teach her these values.

[Anonymous]

yfan you have offered some very interesting information and insight into some ideas for the future. In today's world of technology I would see the Millennials being able to bridge any requirements to make the new ideas work. Banks/CUs need to move into the new world and get past the check and snail mail era. Baby Boomers are disappearing from the scene soon to be followed by the Gen Xer's so a reflection of the change is in order! While I hail from the older era I am embracing the new frontier and it is much easier and more comprehensive for services!

[yfan]

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@Anonymous wrote:
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!!

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Well, not to turn this political but I'm a liberal (may even be of the ultra variety), and this "big banks" excuse drives me nuts. I always use credit cards. Trust is not required to use credit cards, and big banks aren't the only ones issuing credit cards. Credit unions issue credit cards too, and there are laws and an entire federal bureau in place to protect consumer finance. 

[Anonymous]

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@vanillabean wrote:

Once millennials start families, traditional values such as shared cable and good credit will be noticed.

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This is quite the crock.

You don't need to start a family to want to become a home owner, or to buy a new vehicle.

If I ever get married, I'll still keep my finances seperate. 

[Credit_hawk]

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@yfan wrote:

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@Anonymous wrote:
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!!

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Well, not to turn this political but I'm a liberal (may even be of the ultra variety), and this "big banks" excuse drives me nuts. I always use credit cards. Trust is not required to use credit cards, and big banks aren't the only ones issuing credit cards. Credit unions issue credit cards too, and there are laws and an entire federal bureau in place to protect consumer finance. 

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Your post made me laugh. I agree, I know many liberal family and friends who will bank with big banks and are very well educated and financially literate. In fact, there are many studies that show a positive correlation between education and liberalism. Using political leanings to gauge banking preferences or literacy isn't an effective metric. Not to mention many of the top bankers: Dimon, Blankfein and many many more are all democrats. There is definitely no monolith.

[Anonymous]

If true, I'd assume it's mainly because millennials just aren't making much money.

Outside of credit builders and rewards seekers (small percentage of CC users, I'd guess), most peoople actually get credits to borrow money. I'd guess most often, they make solid income, but just live a little beyond their means. Life's expensive when you have a stuff and a family. Broke people don't get credit cards because they know it'll lead to trouble. People making solid income will get them, fully confident they'll pay it back, even if over time because they have steady income. 

Millennnials often seem to be broke. No plans to buy a house anytime soon (thus not worrying about building credit). No plans to start a family anytime soon. They are savvy about this stuff, and understand/accept they are broke. They aren't spending enough to care about rewards. Not to mention all the college loan debt they are dealing with.

[Anonymous]

I'm 18 going onto 19. I think the importance of credit has been stressed a lot in my freshman year. I think at this point my friends are still in awe of how far they are behind me, though thats average. I just want to be able to go into adulthood well prepared I guess. Odd, but we are out there. Most of my friends don't have a TCL of even $1000.

[UncleB]

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@yfan wrote:

I think if banks were able to do some innovation, it would help. What if a bank could create a card that was both a credit card and a debit card (linked to the user's bank account for debit), and was smart enough to figure out what function to use when. At an ATM or a terminal which doesn't take credit, use debit function. At terminals that take credit, use credit. Default online/mobile purchases to credit. Then offer a feature to autopay the credit portion from the linked bank account so the user doesn't have to worry about going into debt.

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Just a couple of weeks ago I tried to get something very similar to what you describe, but was told it's not available at my bank (WF). 

Ironically, I had it 20 years ago with a regional bank (AmSouth, now Regions), and it worked extremely well (even though debit was fairly new then).  The bank had my checking account linked to my MasterCard, so I could use my MasterCard at the ATM to make a withdrawal from my checking account (credit cash advances were still an option as well).  It effectively rendered my Visa debit card obsolete, and I only needed to carry my MasterCard in my wallet.

All the rep could offer was to link my credit account to my debit card, which was the exact opposite of what I was wanting.  When I asked what good this would do, he explained that I would be able to use my debit card at an ATM to make a credit card payment, but I declined since I would never have a reason to do that anyway. 

[Anonymous]

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@Anonymous wrote:

I'm 18 going onto 19. I think the importance of credit has been stressed a lot in my freshman year. I think at this point my friends are still in awe of how far they are behind me, though thats average. I just want to be able to go into adulthood well prepared I guess. Odd, but we are out there. Most of my friends don't have a TCL of even $1000.

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Yes but you are far from the typical millenial.  You have your own Amex Platinum card and are an AU on a Centurion.  So I would assume you are in the 1% of the 1% and are probably ahead of most 30, even 40 year olds.

Lucky that you have a well off family that has amazing credit and financial standings to want a Centurion card (let alone a desire in making you AU on it) and you are financially blessed to afford to travel as much as I'm assuming you do travel to justify having your own Platinum card with its high AF.  You definitely don't have the cards I and a lot of experienced MyFico members would recommend to a college student.

Take away your parents/grandparent's AU cards, add in typical part-time income for a college student then you too might be struggling with a TCL of $1000.