Young adults today are living on a very different financial path than those of previous decades. The Millennials observed job instability, home foreclosures, growing debt and a general feeling of financial unease from their surroundings. Any one of these issues may have attributed to their wariness when inviting debt into their own lives, but there is a distinct reduction in their use of credit cards.
Instead they are choosing to pay as they go. An astounding 60 percent of consumer’s ages 18 to 29 say they do not have a credit card, according to a study commissioned by Bankrate.com. There are other factors involved like the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which made it more difficult for anyone under the age of 21 to get a credit card. So whether this choice comes from worry of debt or lack of opportunity, it’s notably different.
The steady decline in our reliance of credit cards has reached an all-time low with all age groups, according to a Gallup Poll. Did we in fact learn a valuable lesson during the great recession? How many credit cards are in your wallet?
Living within your means is a responsible life plan, but using solely a debit card may not be in your best financial interest. Learning to build a solid credit history is essential in today’s economy. A strong credit score will help you qualify for life’s larger purchases such as obtaining a mortgage or auto loan.
If you have mastered living within your means you are well on your way to building a solid credit history. So, now it may be time to incorporate a credit card to help establish a better financial future. Begin by searching for a low interest, small credit limit and no annual fee credit card. Pay close attention and don’t let yourself create revolving debt. To avoid interest charges and missed payments – use only when you have the money to pay balances at the end of the month. Today’s youth should feel good that they are limiting their debt, but recognize a good financial foundation is also about establishing and maintaining a concrete credit score.
Answers from A to Z