Twenty-seven-year-old Omaha, Nebraska, resident Erin Duffy has never had – or even wanted – a credit card.
“I’ve been able to get along without it,” she says, attributing the choice to ambivalence and a wariness of plastic her parents fostered in her during her formative years. “I’ve liked being able to pay for things as I go, not having to worry about missing a bill.”
Duffy’s decision to live without credit cards is more common than you may think. A whopping 63 percent of millennials (ages 18 to 29) don’t have a credit card, according to a survey commissioned by Bankrate and compiled by Princeton Survey Research Associates International.
Comparatively, only 35 percent of adults 30 and over don’t have credit cards.
There are, admittedly, external factors influencing the statistics. An April 2014 Gallup poll found Americans’ reliance on credit cards, in general, has declined steadily since the Great Recession. Moreover, the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, made it harder for anyone under 21 to get a credit card.
There’s also a more straightforward reason why a majority of millennials aren’t carrying the payment method: Many, like Duffy, just don’t want credit cards.
“I don’t really feel like there’s a need for one in the way I live my life,” says Melissa Pileiro, a 24-year-old resident of Vineland, New Jersey. “The idea with a credit card is you’re essentially putting money down that you don’t have.”
Like many members of her demographic, Pileiro is perfectly content with her debit card, a payment method whose existence has eaten into the credit card’s market share.
Millennials “grew up in a world where the economy was tanking,” says David Pommerehn, senior counsel with the Consumer Bankers Association. “There was great concern about jobs and debts and paying off bills.”
At the same time, college costs – and subsequently student loans – have ballooned. According to the Project for Student Debt, student debt increased an average of 6 percent each year from 2008 to 2012, with college graduates from 2012 having an average student loan debt of $29,400.
I’ve had this conversation with a lot of people lately. At last weekend’s presentation, I was asked by a man when he should allow his teenage daughter to get her first credit card. “As soon as she has income,” I told him. The teen gaped at me, but the father agreed.
I understand the inclination to avoid credit altogether, for the reasons listed above. Debit cards are often enough to get by and so many of us grew up watching our parents (and grandparents) destroyed by these little plastic cards. My cousin (26) recently got her first credit card and her mother cut it into pieces before my cousin even got home. That’s the kind of fear we’ve had drilled into us.
But here’s the thing: there are benefits to having a card—and having one early. The number one factor (accounting for about 35%) of your credit score is the length of time you’ve had credit. This is incredibly important later in life when you need a car loan or want to get an apartment. Employers will even pull your credit score now to make sure you’re trustworthy. You’ve probably heard that no credit is worse than bad credit. And yes, there are other ways to build credit without a credit card—but it’s not the card that’s the problem.
The problem is the way people treat credit cards. It’s not really access to free money. You should never use your card that way. Use a credit card the same way you use your debit card: only spend money you know you have. That’s the kind of lesson parents should be teaching their teens and 20-somethings. Not to cut up the card when it arrives (which, btw, is a terrible plan, because complete lack of use is no bueno for your credit), but to learn fiscal responsibility at a young age.
The answer isn’t to avoid credit cards: it’s to use them wisely. It’s to be more responsible than our parents were. It’s to understand that yes, a credit card IS a big responsibility and it does come with a fair amount of risk, but with just a little bit of self control, you can keep your spending in check and improve your future at the same time. More than ever, credit scores are becoming a deciding factor in all kinds of important choices and ten years down the road, you’re gonna be glad you got the card.
Here’s my whole guide on building credit, which explains more. But seriously: let’s stop scaring teens away and encourage them to learn instead.