Today, the third Thursday in the month of October, is national “Get Smart About Credit Day”, the 15th anniversary of the American Bankers Association’s effort for credit literacy in the United States. While it may pale when compared to “National Chocolate Cupcake Day” which shares the same day, Mercator Advisory Group believes that financial literacy is essential and warrants attention for Gen-Z’ers and beyond. The ABA announces the event here and here.
The basic curriculum is: Knowing Your Credit Score; Paying for College; Protecting Your Identity; Managing Your Money, and Careers in Banking
Bankers struggle with older (millennial) siblings who often miss credit opportunities, as Bloomberg reports:
- Millennials are more likely than older generations to have student loans to pay. About 41 percent of them held such debt, according to a 2015 Pew report. That compares to, at their peaks, 26 percent for Generation X; 13 percent for Baby Boomers; and 3 percent for the Silent Generation.
- And the burden is heavier, too: From 1990 to 2015, student debt for the typical college bachelor’s degree increased about 164 percent, according to Education Department data.
- Those big obligations could explain Millennials’ aversion to borrowing, Currier said. Over time, they may never grow as comfortable with credit cards and debt as previous generations have, she said.
- TransUnion confirms millennials carry fewer cards and have lower balances than Gen-Xers did when the latter group was aged 21-34, thanks in part to legislation limiting the marketing of credit cards on campus and the subsequent boom in the use of debit cards. Millennials have also increased the use of auto and personal loans, TransUnion found, at the expense of credit cards.
For the more advanced session we recommend the following seven topics:
- Establish credit early. It will help when you want to buy an automobile or a house.
- Be Strategic: Use debit cards for everyday purchases; use credit when you need to finance
- It may be boring but read about the terms of the credit card. Always read the disclosure section, often called the Schumer Box. Disclosures are typically written at the 8th-grade reading level.
- Yes, credit cards are a contract relationship with your lender. Keep up with the payments and always try to pay more than the minimum due. My practice is to always try to pay ten times the minimum due but even three times the minimum due will help.
- Keep current. A blemish on your credit file can last seven years on your credit report.
- Protect your card from third party abuse. Most likely, consumer protections will shield you from unauthorized use, but you should respect the card and not let others use it.
- People vary in their card usage. Some people transact, and pay the balance monthly. Others revolve and carry a balance from month to month. Try to transact unless you are paying for a specific, durable item.
National Chocolate Cupcake Day may be more exciting but credit awareness lasts a lifetime and is calorie-free.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group