Wednesday, July 26, 2017

Thrifty Thinking: Millennials and Credit Cards

Lend EDU just released the results of their Millennials and Credit Cards Survey. Among the findings:
- 41% of Millennials said that the thought of using a credit card is a
scary thing.
- 36% of Millennials said that they have maxed out their credit card limit
- 45% of Millennials said that they do not know the interest rate on
their credit card, yet 48% carry a balance on their credit card each
- 24% of Millennials see their credit card as a status symbol
- 6% of Millennials said that a late payment would help their credit score

I had a chance to interview to learn more.
Why is using a credit card scary for millennials?
Using a credit card is scary for millennials because it is believed that many in this generation are afraid of using credit and taking on debt. This stems from growing up in the midst of the Great Recession, when debt was vilified and perceived as a way to damage your financial health. 

What makes it easy to max out credit cards?
It is easy to max out credit cards if you are not paying attention to your spending and financial statements. Swiping a credit card is an effortless process and although it may seem like you are not spending "real" money, you most certainly are.

How can millennials avoid the trap of credit card debt?
Millennials can avoid the trap of credit card debt by not overspending on their credit card and paying attention to their financial habits. It is widely accepted that you should not be utilizing more than 30 percent of your credit.

What can parents do to encourage their young adults to use credit responsibly?
Parents can encourage their young adults to use credit responsibly by guiding them along in their first few months of having a credit card. Read your child's financial statements, pay attention to their spending habits, and give them fair warning when they are being reckless with their credit card. Remind them that credit cards can be an incredibly useful and dynamic financial tool if used correctly, but can also be quite damaging if abused.

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