Millennials Don’t Use Credit Cards Because They Have No Money

Or because they are “financially impotent”

The Big Short

Millennials are too “spooked” to use credit cards, claims Nathaniel Popper of the New York Times.

Data from the Federal Reserve indicates that the percentage of Americans under 35 who hold credit card debt has fallen to its lowest level since 1989.

Why? Millennials are already in debt. In 1995, when there were fewer students going to college, and lower tuition rates for those who did, the average American under 35 had 182 percent less student debt, Popper notes, compared to today. The average millennial now owes $17,200. So maybe student loan payments are too much of a burden to even consider accumulating an additional form of debt.

Popper also proposes that there is this general, paranoid distrust amongst millennials regarding the stability of the economy, which inhibits them from using credit cards. This, I would argue, is inaccurate.

It is true that most of my college-aged friends don’t use credit cards. It’s also true that they may feel an underlying lack of confidence in our economy. But among everyone I’ve talked to, there is a general consensus that getting a credit card one day is inevitable — specifically, after graduation upon reception of a full-time job and steady stream of income. The absence of a consistent revenue source for many students while they’re attending college makes both building credit and affording monthly credit card payments less realistic.

Given the nature of the statistics, however, it seems some millennials are abstaining from getting a credit card indefinitely. Why? Here are my guesses.

We lack awareness

Credit cards offer rewards, warranties, and legal protection that debit cards do not. Even more notably, the benefits of improving your credit score early are immense. And as Popper points out, failing to do so has repercussions for individuals themselves as well as for society as a whole.

Mr. Elliehausen of the Federal Reserve said he expected the aversion to debt among young Americans to continue, potentially with a downside. Credit cards are frequently necessary for the bigger purchases — like washing machines and computers — that can make households more efficient and help the economy grow. And credit cards are usually an essential part of the credit history that allows someone to borrow to buy a house.

Without substantial credit history, it’s more difficult to afford a home mortgage, and it’s often unrealistic to make expensive purchases. And when people aren’t actively spending, economic growth stalls.

We aren’t really financially literate yet

Maybe young people are just bad with money, like many older people are too. Here’s an excerpt from Neal Gabler’s piece in The Atlantic, in which he discusses his “financial impotence,” a term he coined because of what he thought was his situation’s similarity to sexual impotence. In both cases, people often feel a “desperate need to mask [inadequacy] and pretend everything is going swimmingly.”

Basically, I screwed up, royally. I lived beyond my means, primarily because my means kept dwindling. I didn’t take the actions I should have taken, like selling my house and downsizing, though selling might not have covered what I owed on my mortgage. And let me be clear that I am not crying over my plight. I have it a lot better than many, probably most, Americans — which is my point. Maybe we all screwed up. Maybe the 47 percent of American adults who would have trouble with a $400 emergency should have done things differently and more rationally.

We’re more self-aware

Maybe, instead of distrusting the economy, millennials don’t trust themselves. Credit cards do necessitate responsibility. Users need to track their payments and fees and ensure they’re able to offset any debt they accumulate with a portion of their income. And given Gabler’s insights, it’s safe to say many people probably wouldn’t. Or maybe they know that they just don’t know how.

Some experts have proposed implementing financial literacy courses at universities. I actually admitted in the past that I probably wouldn’t take them even if they were offered. But reading this piece was educational for me. I’m probably going to get a credit card. Maybe millennials are salvageable yet, Popper.


Yoni Blumberg is a senior at the University of Delaware, and an Awl network intern this summer

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