Many consumers don’t think twice when they swipe for a morning coffee with their trusty credit card.
But a recent Bankrate survey reveals that millennials are increasingly forgoing plastic.
Almost two-thirds of millennials — a “whopping” 63% — don’t own a single credit card. Only 23% own one credit card, and 6% own two.
Contrastingly, 65% of adults over the age of 30 own at least one.
From a short term perspective, millennials might be making the smart decision by steering clear of credit cards. Bankrate’s survey “found that millennials who do have credit cards aren’t as good at paying down their bills as other demographic groups.” Only 40% of millennials “pay off their balances in full each month”, while 53% of those 30 and over do.
However, forgoing credit cards could have negative implications in the long run because credit cards are one of the best ways for building a good credit score.
And a good credit score is imperative for getting a good price on things like insurance. It’s also extremely difficult to secure financing for homes and cars if your credit score is low or worse, non-existent.
As a result, millennials who aren’t using credit cards — even if they’re just trying to save money or control spending — end up having a hard time getting loans because they haven’t built up enough credit to qualify.
Plus the survey adds that “according to Experian, the average VantageScore for millennials is 628, which lenders largely consider subprime.” As a comparison, Baby Boomers have an average Vantage Score of 700, and Generation Xers have 653.
Millennials’ credit card aversion is attributed to all the usual financial worries of the past five years. They grew up during the Great Recession, and now they’re facing “bloated” student loans.
“‘It’s not so much (that millennials are) anti-credit card, but it’s more the risk of debt’ that they fear,” Eric Lindeen, director of marketing at Zoot Enterprises, told Bankrate.