According to a survey, most millennials—at 63%—do not use credit cards. The survey included responses from 1,161 adults that are currently living in the continental United States. Refusing to get a credit card may seem like the response of a financially responsible individual, but there is one major downside that can be overlooked: When you responsibly use a credit card, you can quickly earn and keep a good credit score. Since 18 to 29-year-olds are avoiding plastic, they must have their reasons for this. Let’s see what they are.
Why don’t millennials have cards?
Many millennials just don’t see the need for credit cards. Using debit cards instead forces them to be financially responsible since they can’t spend more than what’s already in their bank accounts. Many have watched their parents struggle with credit card and other financial troubles, both during and after the Great Recession especially, and have heeded the warnings of their parents. Many millennials are also opposed to credit cards and the potential debt they could bring because they already have lots of debt from student loans thanks to the skyrocketing costs of a college education.
Troubled Credit History
When you don’t have a credit card, however, you will often lack a credit history, and this can create more problems in the future, such as not being able to qualify for some types of insurance, or even sign up for a cell phone plan without first putting down a big security deposit. It might even hurt you when it comes to getting a job. This doesn’t even include buying a home or securing an automobile loan, which both depend a great deal on your established credit history. When your credit history is non-existent, it is much harder for a potential lender to determine if you will be a responsible borrower or not.
Credit Card Benefits
Life can certainly be easier when you have a credit card and use it responsibly. If you haven’t built up an emergency fund yet, a credit card account can be that needed source of cash in an emergency. And when you use a credit card for purchases, you are automatically provided with fraud protection. Although you also get this same protection with a debit card, the credit card protection is generally quicker, and the thief will not have been able to actually get cash from your bank account. Credit cards also often provide travel insurance and extended warranties. When it comes to a dispute, it’s almost like you have a huge multinational law firm on your side.
Save Cash With Rewards
If you take some care in which card you choose, your credit card may also offer a cash back rewards program that will give you up to 3% back on any purchases you make with your card. If you put $500 on your credit card each month, paying it off to avoid any interest charges, you’ll be rewarded with an extra $150 at the end of the year. You’re basically getting a 3% discount on every qualifying purchase that you make on your card. If you spend $100 at the supermarket, your actual cost is $97. When you conscientiously pay off your charges in full each month, this reward is free money, and you’ll get any other benefits as well.
In Summation
If you’re a millennial and have avoided getting a credit card so far, you may want to consider signing up for one soon. Only sign up for one credit card, however, so that you can easily manage your debt, and this will also make it easier to check for fraudulent activity as well as keep track of your spending. Having a lot of cards doesn’t really help when it comes to establishing a good credit history anyway, and the disadvantages to having a lot of cards should be obvious. Make sure you limit your credit card use so that you can easily pay off your balance every month, and don’t give in to the temptation to use your card for big-ticket items—that’s how people end up in debt.
