Why Millennials Are Choosing Debit Rather Than Credit

Credit Cards

These days a substantial number of young adults are opting out of credit cards altogether.

In a recent study, FICO nicknamed the Millennial generation “The Young and the Cardless.” According to their research, in 2012, 16% of those ages 18-29 had no credit cards whatsoever. Back in 2005, before the Great Recession hit, just 9% of young adults avoided credit cards altogether. The credit-free trend is actually true for every age group all the way up to seniors, but the shift is most dramatic among younger consumers.

Fewer people have credit cards in their wallets, but even among those who do, balances are significantly lower than they were five years ago. In 2012, the average credit card debt for young adults was $3,073. In 2012, young America’s credit card debit has dropped to $2,087. In fact, the only type of debt that is growing among young adult is student loan debt, which grew from an average of $6,500 in 2007 to $11,500 in 2012.

Why are young people avoiding credit cards?

According to the FICO report, there are several reasons why more and more young people are avoiding credit cards. For one, the Great Recession left Millennials worried about post-college unemployment and with that the inability to pay off credit bills. It is also more difficult for young people to qualify for credit cards now, thanks to the CARD Act of 2009, which requires consumers under 21 to prove their ability to pay off debt or have a co-signer.

We talked with a handful of Millennials to get a firsthand perspective on the credit-free trend.

Avoiding credit for life

“I’m 28 years old and I’ve never used a credit card, mainly because I never saw the use for one,” says Kimberly who works in recruiting. “I use debit cards for everything, and have been since high school. I try to keep my bills at a minimum, and I prefer to spend money I have.”

Learning from parents’ mistakes

“I watched both of my parents charge, charge, charge their way right into a hole,” says Ariels, who works in business development. “I feel that I would follow suit, charging senseless and frivolous shopping trips that I couldn’t actually afford, just because I was able.”

Choosing the right card

“I have considered applying for credit cards, but it seems overwhelming to pick the right card with the right terms, and then use the card responsibly. Rather than open up Pandora’s Box, I have chosen to avoid using a credit card altogether.”

Waiting for the right time

“I got my first credit card this year at 28,” says Tyler, who lives in Missouri. “I’ve used a debit card for years, but growing up, I always prided myself on only buying things that I could afford right then and there.”

Credit cards to build good history

“I’m in my mid-20s and believe it is extremely important to build up a good history of credit for future purposes, such as buying a car or real estate,” says Naresh, who founded her own media and marketing agency.

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