Young Adults Are Avoiding Credit Cards

Photo (cc) by 401(K) 2013

The Denver Post reports fewer young adults are paying with plastic, which has some positives and negatives.

They say 39 percent of undergrads under 24 had a credit card last year. In 2010, it was 49 percent. Part of that may be the 2009 CARD Act, which made it harder for college students to get one.

But those who have them are using them less, too: government data shows the average balance for the age group dropped from $2,500 in 2001 to $1,600 in 2010.

Whatever the reason, it means college students have decreasing debt (except student loans). That’s obviously good.

But fewer credit cards also means fewer young people are building a credit history. Payment history and length of credit history amount to about half of credit scores. If today’s youth has lower scores due to inactivity, they theoretically may pay more for car insurance, as well as for credit cards and loans when they decide to get them.

The Post says lenders are looking at ways to avoid this, possibly by incorporating rent and phone or cable bills in credit histories. That could potentially be good for students avoiding credit cards, but makes paying these bills on time more important for everybody.

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