In 2007, only 8% of adults between 18 and 29 didn’t have any credits; today, the figure stands at 16%, a substantial jump in only six years. Experts believe that the dip in young consumers’ credit card use is due to a combination of factors. On the one hand, it’s much harder for those under 21 to obtain a credit card than it used to be. This is a result of the CARD Act of 2009, which requires that those under 21 who cannot document a substantial income (i.e., college students) to have their credit cards cosigned. Without a credit-worthy parent or sibling to back up their applications, many young adults simply cannot get a credit card. On the other hand, interest in credit cards seems to have waned among young Americans who have seen the devastating effects that debt has had on older adults in their lives.
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The reduction in credit card use among Millennials is viewed as a somewhat mixed blessing by personal finance professionals. According to CNN Money, credit card debt among those in the 18-29 age group has decreased by over 30% since the onset of the recession, down to an average of $2,087 per person. This is clearly a positive development. However, credit cards are a valuable tool for building credit when used responsibly, and some worry that young adults are missing out on an opportunity to bolster their credit scores in preparation for other financial tasks, such as purchasing a home. Also, in lieu of credit cards, there has been a spike in usage of pre-paid debit cards among young adults, which often carry high fees.
What do you think of the decline in credit card use among young Americans?