Millennials faced a difficult entry into adulthood. Many came of age during the housing crisis and the Great Recession, facing scarce jobs and crushing student loan debt. It makes sense that Millennials would be wary of taking on more debt – and Experian's most recent State of Credit Report backs that up.
According to Experian's report, Millennials held an average of $4,315 in credit card balances in 2017 – far less than Baby Boomers ($7,550) and Gen Xers ($7,750). Even Silent Generation members had more average credit card debt at $4,613. Only the younger Generation Z held lower credit card debt ($2,047), probably because they haven't had time or sufficient credit limits to rack up large balances.
However, being credit averse doesn't mean you cut off credit cards entirely. A new survey from Cornerstone Advisors found that more than seven in ten Millennials have at least one credit card.
Card-carrying percentages increase with age, as 70% of younger Millennials (ages 20-29) have credit cards while 73% of older Millennials (ages 30-38) do. Credit card ownership rates increase to 77% for Generation X and 85% for Baby Boomers.
The temptations of rewards may be overcoming credit aversion. According to Cornerstone, about three-quarters of younger Millennials with credit cards have rewards cards. Eighty percent of older Millennials and Gen Xers have rewards with their cards, as do 85% of Baby Boomers. Given that they are just starting out in the working world, it's possible that some younger Millennials don't qualify for rewards-bearing cards, dragging the percentage lower compared to older Millennials.
Let's give Millennials credit (pun intended). They may be using credit more wisely.
Experian studied the habits of consumers with perfect credit scores and found that they didn't limit their number of credit cards – they actually had more cards than the average consumer. On average, Americans carry 3.8 credit cards while those with perfect credit scores carried 6.4 credit cards. However, the perfect score group carried an average total balance of $3,025 compared to the $6,445 national average. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
The perfect score group carries more credit accounts, but charges less on them. They show responsible credit behavior over a wide number of accounts and stay well below their credit limits. On-time payments, low credit usage, and multiple accounts in good standing are three of the most important factors in a high credit score. The lower balances of Millennials may serve them well.
Does that mean Millennials will have the last laugh? Not necessarily. Experian research shows that total average debt balances tend to grow until age 44, holding steady for a few years before beginning to fade. If this statistic holds true over time, Millennials have yet to reach their peak debt load – with many more than a decade away.
Over time, we'll see if Millennials give in to the same credit tendencies as Baby Boomers or if they can keep debt under greater control. Other research suggests that Millennials tend to rack up more non-essential debt on their credit cards – but at least it appears that most Millennials are accepting of credit cards and how they can play a role in responsible borrowing behavior.
Millennials are wise to be wary of credit and use it sparingly. If they budget wisely to keep spending and credit card balances to a minimum, they will emerge with higher credit scores and better access to future credit – as long as they remember to pay their bills on time. That's pretty good advice regardless of your generation or economic situation.
If you want more credit, check out our list of credit card offers.