Millennials shun any kind of debt, especially credit cards, and their reluctance to pull out the plastic could have lasting repercussions for the financial system and the economy, according to an expert.
NEW YORK, NEW YORK, UNITED STATES (REUTERS) – Like many millennials, Stefanie O’Connell was in a big hole. After graduating from college with a drama degree, she faced a big debt and slim job prospects in the wake of the 2008 economic crisis. So she learned about personal finance, and she now runs a wealth management blog to help others. She sees a pattern among her millennial readers. She says, “They’re very wary of spending beyond their means. They’re wary of tools like credit cards. They’re wary of taking any kind of risk, even if it is a smart risk, like investing.”
Data from the Federal Reserve indicates the percentage of Americans under 35 who hold credit card debt has fallen to its lowest level since 1989, when the Fed began collecting numbers. Their reluctance to pull out the plastic could have lasting repercussions for millennials, the financial system, and the economy, says credit expert Adam Levin. A credit score is essential in the U.S. to access everything from an apartment to a cell phone, and it’s even used by employers. Levin says, “It’s critically important for a young person to build credit, to build strong credit. It doesn’t mean that you over credit yourself, but it means that you are wise about your credit, you are a responsible payer, and you don’t get yourself in over your head.”
Banks and the financial system need not panic yet. The New York Fed says Americans’ use of credit cards has been creeping up again. O’Connell says millennials can still build credit while living within their means by using apps like Level Money. It tells users how much of their bank balance they can spend each month on coffee, eating out, and other non-essentials.