Living with credit

Millennials will switch to credit cards over time

Sienna Kossman

“Do millennials prefer debit cards to credit cards? What does the evidence say?”

The financial habits of young adults always seem to be a hot topic, so when this question appeared on Quora, a question-and-answer information website, I felt it deserved a solid answer. As both a millennial and reporter, I understand this topic personally and professionally.

There’s a slew of reasons why young adults may prefer debit cards to credit cards these days. In fact, thanks to lingering Great Recession fears, massive student loan debt burdens and rules restricting our access to credit, it’s not surprising most millennials have an affinity for debit cards.

For many young adults — myself included — the recession opened our eyes to the downfall of financial instability. Whether millennials watched parents struggle to make ends meet or entered a job market post-college boasting a 10 percent unemployment rate, the recession left many wary about taking on more financial responsibilities than they could handle.

By using debit cards, millennials take solace knowing they can’t spend more than they can afford, which is a real risk associated with credit cards. The economy may now be improving, but not all worries have faded away. We don’t hate credit, we’re just a bit wary. Debit cards still feel easier to control.

High college costs have also taken a toll on the financial abilities of young adults. According to the Federal Reserve, the national student loan balance reached $1.3 trillion in December and those who graduated from college in 2014 carried an average student loan burden of $28,950. For a millennial on an entry-level salary, getting that much debt under control may be a more pressing issue than learning to use a credit card to his or her advantage. Lenders may also be leery to issue a card to a young adult with a short credit profile that’s already bloated with debt.

Lastly, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (often referred to as the CARD Act) made it harder for those younger than 21 to access credit. The federal law banned issuers from issuing credit cards to anyone under the age of 21 unless he or she has a co-signer or proof that their income is enough to repay any card debt he or she may accrue.

For millennials still in college or still struggling to find a stable job after graduation, those can be tough stipulations to satisfy. Debit cards are just more accessible to millennials, especially younger ones. As a result, the CARD Act may delay when young adults actually start using credit cards and when they start to favor credit over debit.

However, there is evidence millennials aren’t completely opposed to using credit cards when they have them. For example, a recent survey which examined how consumers pay for small purchases found that while most millennials (18-to-29-year-olds) will use a debit card to pay for a cup of coffee, they are twice as likely to pay for a small purchase with a credit card than those older than 65. This indicates that while millennials might not have a wallet full of credit cards, those who have a card are comfortable using it for day-to-day expenses.

As time allows further economic recovery and young adults age into the credit card market and start tackling their student loan debt balances, I believe more millennials will start favoring credit over debit.  Even after four years of holding credit cards, I’m just starting to loosen my grip on my debit card. We, as millennials, will get there.


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