Did you know that 63% of Millennials don’t have a credit card? That’s according to a survey done by Bankrate.
It is fair to say the millennials have been very controversial. Millennials have been accused of disrupting many industries. Casual dining, fitness, and personal finance, are some of the industries millennials have been blamed for wreaking havoc in. When it comes to their finances, millennials are much warier, and that doesn’t bode well for banks and credit cards companies.
But, are millennials entirely to blame?
Here are three reasons why millennials are shunning credit cards.
What Is A Millennial?
Also known as Gen Y, if you were born between 1980-1999, you are considered a millennial. They make up 2.3 billion of the world’s population. So, it makes sense that they are the largest age group in the workforce. Although they are riddled with the highest college tuition fees and the highest cost of living, they still get a bad rap, especially when it comes to finances.
The reality is, millennials have different financial goals. Plus, their approach is completely different from the previous generation.
Fear of Debt
The 2008 global financial crisis and crushingly high student fees may have scared some Millennials of using credit cards.
Earning a college degree comes with a hefty price tag and an even heftier student loan. Having such a hefty financial burden plus the high cost of living is a major factor why millennials have an aversion to borrowing.
After all, who wants to get more into debt?
Budgeting and Technology
Millennials are web and mobile users. But, they don’t just use their smartphones to swipe right or to flaunt their lifestyle on social media. The increasing popularity of finance apps and easily accessible tools have helped millennials understand their finances better.
With such apps, they can organize, plan, budget and improve their finances.
Buy Now Pay Later
It is no secret that millennials are affluent and love expensive goods.
What they also love is point of sale (PoS) finance, also known as “buy now, pay later.” More and more millennials have opted to use these services from POS finance companies like ChargeAfter.com, and it is continually growing.
According to Kearney, a global consulting partnership, over 67% of millennials use this type of service.
Should Millenials Use Credit Cards?
It isn’t that millennials don’t want to use credit cards, they are just more aware of debt, borrowing and have used alternative ways. In fact, Solana Cozzo, VP of Prepaid and Financial Inclusion at Mastercard said: “as millennials grow older and more affluent, the ownership of credit cards and the need for and desire for credit cards will increase.”
This is partly due to the fact that as millennials get older and have children, their spending habits are likely to change as well.
Three benefits of using a credit card include.
Credit score. If you want to buy a home or take out a loan, the first thing a lender will check is your credit score. Lenders want to see your credit history and past spending habits and if you don’t have a credit card, you will have a hard time trying to get a loan.
Rewards. A great benefit of using credit cards is the rewards you can accumulate. When done responsibly, you can access great opportunities like cash-back on purchases and airline miles.
Fraud protection. When it comes to fraud, you are better protected when using a credit card than a debit card. This is because, with credit cards, you are not personally liable for anything above $50. Unlike debit cards, where you could be liable for much more, especially if you don’t report it quickly.
Final Thoughts
Millennials have revolutionized the economy, changed human interactions, and disrupted many industries. And that isn’t necessarily a bad thing. There is nothing wrong with being more aware of your personal finances and knowing how to budget correctly.
Having a credit card bodes well if you are thinking about purchasing a home in the future. As a good credit score is a huge determining factor for lenders.
On the flip side, as a millennial, you get the best of both worlds. Using Buy now pay later financing options will enable you to get the most affordable payment plans for the goods and services you want, while having a credit card can also help improve your credit score if you are thinking about purchasing a home in the future. As a good credit score is a huge determining factor for lenders.