An analysis on consumer debt by the New York Times has shown that young consumers are using fewer credit cards. According to data received by the publication from the Federal Reserve, the percentage of consumers under the age of 35 with credit card debt is the lowest it's been since 1989.
While many millennials are proud of the fact that they are debt-free, financial experts have pointed out that this lack of debt may result in problems. Credit cards are often a way for young consumers to begin building up their credit history. Without such a history, they may later find it more difficult to receive an auto loan or a mortgage. If a borrower cannot show any history with credit, a potential lender has no way of knowing how they will respond to monthly loan payments.
While millennials avoid using credit cards, most also avoid carrying large amounts of cash. Instead, these young consumers pay using methods such as debit cards or online and mobile payment options such as PayPal, both of which are connected to the consumer's bank account. This combines the convenience of a credit card without the debt that comes with it.
Part of the reluctance to take on debt is connected to the fact that many of these young consumers were living with their parents during the 2008 recession, and saw those who were in debt lose their jobs and deal with that financial burden. Understandably, millennials want to avoid falling into the same debt trap their parents were in.
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