Why millennials avoid credit cards

Why millennials avoid credit cards

August 22, 2016
millennials avoid credit cards
Source: Shutterstock

Millennials, the “New Great Generation”, are said to be entitled, self-involved and lacking in perspective. But there’s one more thing that defines them. Unlike most Americans, millennials avoid credit cards.

The reasons behind this decision are numerous. In order to understand them better, we’ve asked Monica Bell, a 28-year old marketing assistant currently living in Cincinnati, to help us out.

It’s not the credit card, it’s the debt that comes with it

“I don’t feel like I need a credit card, I’m doing very well without it,” Bell told us. “I’m using debit(i.e. a debit card). This way I can pay online for anything and I don’t want to worry about missing payments.”

According to many recent surveys, two out of three millennials don’t even own a credit card. And it’s not because they don’t like credit. The real reason is because they don’t want debt. Millennials have grown up during the last recession and it’s safe to say that it shaped them.

“I was in my first year of college when the recession hit and I remember how shocked I was when I found out that my best friend’s father was laid off. All my hopes of finding a job, even a part-time job, and building for the future were gone just like that. It was really scary,” Bell said.

Most Americans went through the same thing, but only this younger generation came out of it with a new lifestyle. The explanation for this might be the fact that owning a credit card can be addictive. Credit cards offer numerous benefits. You can get discounts, free airplane tickets and many other things that Americans seem to find very important. However, millennials focus on something else.

Building for the future

“With credit cards you’re just spending money that you don’t have,” Monica told us.  That’s why young people just like her are using debit cards. They’re spending the money that they do have without the fear of missing payments and falling into debt. Also, they’re not big spenders. Millennials, more than any other generation, like to save money. They’re doing this by living with their parents, delaying buying a home or a car, putting off marriage or by using the internet to do research and find the best deals.

“Not having to deal with paying a credit card bill each month is a huge relief. Especially now that I’ve started repaying my student loans,” Bell said. This is another reason why millennials are trying to avoid debt as much as possible. College costs have skyrocketed in the past years and they’ve taken student loans with them.

A generation of change

There’s no doubt that a more financially responsible generation is a good thing. And it’s interesting to see what kind of changes they will bring in. Right now, however, it seems like the odds are stacked against them. The credit industry is refusing to change, hoping that things will come back to normal as millennials start moving out of their parents’ homes, as they get better jobs and as the need for a credit card becomes greater. If you want to buy a home or a car, you need to take out a loan. And, to get a loan, you need credit history. For that, you have to take on a certain amount of debt and build creditworthiness.

Monica Bell plans to move to New York City in the next two years. “I heard it’s necessary to build credit if you want to rent there. So I’ll probably have to get a credit card, It’s frustrating,” she said.

But things may not always be so. After the last recession, companies such as TransUnion or Experian have added rent data to their credit reports. It’s a start. And, if millennials continue to reject traditional credit sources, we might just see the birth of a new age of financing.


Thomas Hookton

Thomas Hookton is a finance journalist, history buff and science fiction connoisseur. Hit him up via email.

Around the web

Join the Conversation