For a long time, the conventional wisdom was that millennials hated credit cards. There was a lot of hand-wringing about this fact in the media, but the logic made sense: Burned by both the recession and the student debt bubble, young adults were skeptical of financial institutions and reluctant to take on risk.
But now even the basic narrative that millennials avoid taking on high-interest credit card debt is revealing itself to be untrue. According to new data from the New York Federal Reserve, some members of the generation known for staying out of consumer debt have found themselves swimming in it. Credit card delinquencies among 18-to-29-year-olds is now at an eight-year high of 8 percent. Though there are a variety of reasons for this, one of them is undeniably grim: In an economy that is by several indications doing great, as many as four out of 10 young people still seemingly can’t pay for basic necessities with their paychecks alone. That’s leading some to embrace credit cards as a way out.
That finding bolsters last year’s data from the Federal Reserve, which revealed that about 40 percent of Americans wouldn’t be able to cover an emergency expense of about $400. Younger people are worse off, according to a poll released earlier this year: Not only did they not have that money in the bank, about four in 10 millennials have gone into credit card debt for day-to-day expenses like groceries, while 20 percent have accrued debt over sudden costs like car repairs or medical bills.
“I think we can take some comfort in this, because people are being responsible,” said Ted Rossman, an expert at creditcards.com. "But then again, people can’t make ends meet. It’s troubling how close to the edge people are.”
For a while, Millennials truly weren’t using these cards very much. In 2009, Congress enacted a bill meant to shoo credit card marketers off of college campuses. The unintended result was that people didn’t build credit early and thus had a difficult time getting approved for such cards well into their mid-20s, according to Rossman. “It’s like getting your first job,” he said. “Everyone wants you to have experience, but you can’t get any experience without first getting hired.”
In the past several years, however, there’s been an uptick in credit card use among younger people. Some of that had to do with people on the older end of that spectrum—elder millennials are now 37—having careers and kids and mortgages. Plus, companies like Visa figured out that rewards are more appealing than low interest rates to millennials, who notoriously crave experiences more than material things. When Chase came out with the Chase Sapphire card in 2016, which is considered by travel hackers to be one of the best ways to see the world for free, it started an arms race among credit card companies eager to get this previously elusive demographic using their plastic.
These factors combined to create a trend: While only 41 percent of 20-somethings had a credit card in 2012, now more than half do, according to the Fed. More people using cards inevitably means more people falling behind on paying their bills.
“Between student loan debt, credit card debt, and other financial obligations, young consumers are spread thin,” said Sara Rathner, a credit card expert at NerdWallet. “More millennials also have mortgages now that the generation is approaching the age of 40, which adds to their monthly debt-payment burden. Unfortunately, incomes haven’t kept up with expenses like medical care and dining out, so millennials are strapped for cash in a way that previous generations weren’t at similar ages.”
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Allie Conti, Khareem Sudlow
