Millennial Consumer Debt Trends
Millennials use credit cards, just not at the same rate (or for the same reasons) as Gen Xers and Baby Boomers.
Millennials are categorized as those born in the early 1980s to early 2000s. This is a rather large group, basically covering 18-to-35-year olds today. To stereotype the spending patterns of the generation as a whole would be inaccurate. However, there are some noteworthy trends that largely hold true, especially when it comes to shopping and utilizing credit cards.
Evidence suggests that, millennials are financially responsible in many ways, even if they do carry huge student loan debt, averaging about $30,000 per person.
Millennial Credit Card Debt by the Numbers
The two age groups least likely to have credit cards are millennials and people over 74. The same two groups also carry less credit card debt than other age groups:
- Less than 35 years $5,808
- 35 to 44 years $8,235
- 45 to 54 years $9,096
- 55 to 64 years $8,158
- 65 years and over $6,351
- 65 to 69 years $6,876
- 70 to 74 years $6,465
- 75 and over $5,638
A study compiled by Princeton Survey Research Associates International shows that 60 percent of millennials between 18-to-29 don’t even have a credit card. By contrast, only 35 percent of adults over 30 don’t have a credit card.
In large part, this can be attributed to the recession of 2008. Americans’ dependence on credit cards has steadily declined since that time, and millennials have become cautious of getting one because they saw first-hand what their parents went through. The percentage of those under 35 years old who hold credit card debt has fallen to its lowest level in nearly 30 years.
Another possible contributing factor is the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which makes it tougher for anyone under 21 to get a credit card. The law is meant to protect credit card holders from unfair practices, such as imposing fees for going over the spending limit, or tacking on a fee without warning. Consumers under 21 have to jump through specific hoops to get a credit card, so they may be more reluctant to apply for one. They must file a written application, and potentially may have to have a cosigner.
What Do Millennials Do With Their Credit Cards?
Even though millennials aren’t racking up a bunch of credit card debt, it doesn’t mean they aren’t applying for (and using) credit cards.
The younger half of the generation is more focused on spending on intangible purchases, like restaurants and travel. By and large, this trend is focused among the 20-somethings, but is dynamic enough that analysts assert that millennials are buying “experiences” rather than things. Unlike Baby Boomers or Generation X, younger shoppers today are thrifty when it comes to consumer goods — and the associated debt — while focusing their purchasing power on building memories, rather than material collections.
Travel and credit cards go hand-in-hand, especially with a card that rewards the user. It should come as no surprise, then, that Millennials make up the main group of people who apply for cards with especially travel-oriented rewards programs. If you can rack up enough points to score a free trip, there’s incentive to use the card.
What Should Millennials Do With Their Credit Cards?
It’s tricky to draw an definite conclusion about the spending habits of millennials. The New York Times recently reported that millennials are spending more on groceries, restaurants, gas and cellphone bills than older generations.
The spending makes sense though as the older half of the millennial generation (in contrast to the younger, travel inclined half) is having children and moving into the “soccer mom and suburban dad” lifestyle, which accounts for higher grocery and gas bills.
When you have kids, it changes how you spend your money. Some of these purchases are going onto credit cards, because of the rewards that are offered by credit card companies when you pay your balance off every month. It pays to be a consumer.
Putting basic necessities on a credit card is a pretty smart move as long as you pay off the balance every month. Those every-day items present a great opportunity to earn money back or points that you can put toward vacations. The reward cards are basically free money if used responsibly.
It might be wise to open a card for a bigger purchase, as well. On average, Americans make about five purchases of more than $500 each year. People with good credit, a score of 720 or above, should consider opening a rewards card to make a major buy. The rewards can only be collected if the balance is paid in full, however. That’s where people get into trouble.
Your credit score is a gauge of how much you can be trusted to borrow money. If someone is living within their means and making monthly payments and has a good credit score, there shouldn’t be problems, especially for millennials who are fiscally responsible.
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This post was updated February 28, 2019. It was originally published September 11, 2017.