An article published today by a NerdWallet contributor contends that millenials’ dislike of credit cards is exaggerated and caused by a lack of access due to the Card Act of 2009 limiting adults under the age of 21 access to credit cards without proof of income or a co-signature for the card. And, in 2009 and 2010, issuers restricted access to credit cards for only consumers with the best credit, which excluded young adults who did not have a credit history. Rather than using credit cards, young adults took personal loans, as millennials opened twice as many personal loans as Gen Z did at the same age, according to a 2017 TransUnion study, which also cited the rise of online personal loans from fintech companies growing from 2% of the U.S. personal loan market in 2009 to 24% in 2016. Since issuers have been easing lending criteria, millennials returned to using credit cards, opening nearly twice as many new credit card accounts in the first half of 2018 compared to the same period of 2013.
“The financial crisis, along with crushing student balances did leave some millennials wary of debt. But as lenders started loosening up criteria, millennials responded. The number of new credit card accounts opened by millenials jumped from 5.5 million in the first half of 2013 to 9.3 million in the same period this year, TransUnion said.”
According to the 2018 CustomerMonitor Survey Series Payments survey, millennials (53% use credit cards) are still less likely than older adults (60% of 35-64 year olds and 80% of seniors) to use general purpose credit cards, especially the 18-24 year olds (48% use credit cards), probably more to do with their fear of racking up interest charges on their credit card and insufficient credit when needed than lack of access. The youngest adults are nearly twice as likely as average to prefer using cash in stores. Young adults who use credit cards are less likely than average to pay their credit card balance in full every month so are less inclined than average to participate in credit card rewards programs. To avoid extra fees, millennials are more likely than average to set up automatic payments for their credit cards. They also use fewer credit cards than average. But, millennials are a good target for credit cards, since they are more likely than average to use premium cards with annual fees. They look for the best value in rewards whether it is from bank-issued or merchant rewards.
Overview by Karen Augustine, Manager, Primary Data Services at Mercator Advisory Group