Why millennials are running away from credit cards?


A guest contribution by Patricia Sanders- Patricia Sanders is a content developer at Debt Consolidation Care Community . Her passion is writing on various financial topics. A coffee addict and a voracious reader by nature, her motto is simple – Live simply and spread happiness. You can check out her updates at https://www.facebook.com/patricia.sanders.18294 and find her articles at https://wiki.debtcc.com/.

Why millennials are running away from credit cards?

Thanks to the financial crisis of 2008-2009, millennials are running away from credit cards. They have seen the strain that credit card puts on people during the economic downturn. And, they aren’t ready to go through a similar experience.

The typical sentiment of the millennials is to save and invest for the long term instead of humming the mantra – “buy, buy and buy”. They don’t want to take any risk. They don’t want to run into credit card debt and delay their big plans in life. It’s as simple as that.

The risks involved with credit card debt are too high.

Millennials have seen their parents suffer due to the side-effects of credit card debt. So, they are scared. They don’t want to use credit cards irresponsibly.

But, on a practical note, it is also true that laws enacted after the economic downturn made it more difficult for millennials to qualify for credit cards. As per the Credit Card Act, young Americans won’t qualify for credit cards unless they can prove their ability to pay bills every month. They need to have an income to pay credit card companies.

The “free T-shirt campaign” run by credit card companies is hardly seen on the college campuses nowadays. Young Americans under 21 can’t qualify for credit cards without a proof of solid income or parents’ signature. So, the earlier strategy of credit card companies to lure student hardly work nowadays.

Another possible reason behind millennials’ aversion towards credit card is the rising student loan debt. Millennials are already exhausted due to student loan debt. It has left a sour taste in their mouth. Most of them are compelled to postpone their weddings, home purchase plans, family plans, etc. due to burgeoning student loan debt. So, it is quite natural that they are not willing to increase their debt pressure.

To avoid using credit cards, most millennials are going for a payment method that doesn’t involve cash or check. And, why would they? There are so many other payment options for smallest transactions – Paypal, debit cards, and other online payment systems. And, all of these draw funds straightway from a bank account.

Federal Reserve’s observation

Federal Reserve’s recent data suggests that 37% of households headed by millennials (aged 35) had credit card debt in 2013, a figure down by a quarter from immediately before the recession.

Federal Reserve anticipated that young American’s aversion to credit cards will lessen with time, which unfortunately didn’t happen. One needs credit cards for making big purchases; be it a home or a laptop. These big purchases help economy to grow and develop. Plus, credit cards are an integral part of credit history. But, millennials have something else in mind.


It isn’t that millennials are only avoiding credit cards. Statistics reveal that they are also applying for fewer home loans and auto loans than what people belonging to similar age group did before the recession.

What is the consequence?

Well, millennials’ refusal to accept credit cards can have deadly consequences for the nation’s economy. Previously, credit card usage helped Americans to build credit and make big purchases. The biggest of them is a home. Millennials are forgetting this fact that they can’t qualify for mortgage without a robust credit history. Without credit cards, it would be difficult to build credit for the millennials.

It’s good that millennials don’t want to be in debt like their parents. But, their aversion to credit cards can delay their plans to buy a home.

The bottomline

We can’t blame millennials completely. At the end of the day, credit cards are directly related to credit score. If millennials can’t manage credit cards like a pro, then they will have to face the terrible consequences.

Millennials can manage credit cards effectively as long as they know the terms associated with credit cards well. Secondly, they have to know how and when to pay off outstanding balance. A good tip is to pay more than the minimum amount every month so that their outstanding balance is low. This would help young Americans stay within their credit limit also. Remember, credit limit has a big impact on credit score. It’s mainly about being financial literate. That’s all.