Data shows that a growing number of millennials are not taking out credit cards in order to avoid potential debt. This might seem like a good idea, but it can have negative consequences. With no financial history, creditors have less data of timely payments and responsible debt management to work with, meaning that millennials could find themselves faced with poor credit scores.
According to Consumer Reports, it is a mistake not to have a credit card. When calculating credit scores, companies take many financial transactions into consideration. These are used to provide access to financing for mortgages and car loans. Scores for those without a credit card will not be good, and they could be hampered in their efforts to borrow.
Consumers should try to build up a credit score of 650 or higher. Using a credit card responsibly – making transactions and paying them off on time – is an important part of boosting your credit score. Payment alerts can be set up on your smartphone so that you remain aware of any transactions on your card. Also, it's a good idea not to store details with online retailers, as this avoids the temptation to click and buy. Some credit cards also have perks that millennials could take advantage of, and operators often provide fraud protection, which doesn't apply to normal debit cards.
While it might not seem like a good idea, there are some benefits to taking out a credit card. The key is to use it responsibly and avoid spiraling into overwhelming debt.
If you want more credit, check out MoneyTips' list of credit card offers.