Why Aren’t Millennials Using Credit Cards?

According to research by the Federal Reserve, the number of consumers under age 35 using credit cards has fallen from 25% in 2000 to only 10% in 2013 – the lowest level since 1989, reports Time.

Additionally, the level of debt in this age group has hit an all-time low. “I think millennials having less credit card debt is simply a result of that group having fewer credit cards,” CreditCardForum.com’s Ben Woolsey told Time.

So how do millenials prefer to pay? According to a survey by Chime, a mobile bank account, millennials would rather use debit cards for their purchases.

What’s with the Shift?

For starters, many people in this age group entered adult life in the midst of the economic crisis, where unemployment was widespread, or they may have witnessed other relatives struggle with debt during that time, and want to avoid the same issue.

Plus, many millennials still face debt from student loans.

The CARD Act of 2009 made it much more difficult for young adults to access credit cards. This law mandates that Americans 21 and under must prove they have a steady income or have an adult co-signer in order to obtain a credit card in their name.

Avoiding Credit Cards Puts Millennials at a Disadvantage

Most credit cards have some sort of rewards benefit, whether it’s airline miles, hotel loyalty points or cash back.

Also, using credit cards – which includes consistently paying credit card bills on time – improves your credit score, which allows you to qualify for low-interest rates on big-ticket items.

A weaker credit score, on the other hand, results in a higher rate. So when you need money for a costly item, like a car, borrowing becomes more expensive.

Learn More about the Credit Card Acceptance Advantage:

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