U.S. Consumers and Credit: Young Adults Return to Credit Card Use

by Karen Augustine 0

Since the Card Act of 2009, young adults had been avoiding credit card use in favor of pay now or pay before options due to the tighter restrictions that financial institutions placed on credit cards offered to young adults. Before the Durbin Act was enacted, debit card use was rising, particularly among the young adults who preferred debit to credit card use, and with their burgeoning debt load from college, they were averse to accruing even more credit card debt with notoriously high interest charges. As noted in this recent article from the Boston Globe, Mercator Advisory Group’s latest Insight Summary report from our CustomerMonitor Survey Series, entitled U.S. Consumers and Credit: Young Adults Return to Credit Card Use, based on our survey of 3,000 U.S. adults fielded in June 2016, credit card use is growing – 63% of all respondents use credit cards, up from 61% in 2014 and 2015 and 60% in 2013. Moreover, credit card use is growing fastest among young adults, particularly the 25-34 year olds, 2 in 3 of whom claim to use credit cards, up from just 3 in 5 who did so in 2015 and just over half who used credit cards in 2013. The youngest adults, aged 18-24 are still less prone to using credit cards, since less than half use them in 2016, less than any other age segment. Yet, the 25-34 year olds are more likely than 18-24 year olds to shop at online retailers, where credit cards are preferred, primarily for their fraud protection and ease of disputes.

Are the notoriously credit card-shy millennials getting more comfortable with debt?

Perhaps.

A new survey has found that two out of three young adults now use credit cards, up from just half of them in 2013. And for the first time since 2009, consumers between the ages of 25-34 are more likely than the average consumer to reach for plastic, according to a new survey by Maynard-based payments consulting company Mercator Advisory Group.

According to this study, millennials who use credit cards are less likely than average to pay their credit card bills in full every month (40% vs. 52% average), thus reporting they usually carry a balance on their credit cards. However, these millennials are definitely money-conscious and do not want to pay any extra fees. In fact, young adults are more likely to set up automatic payments for their credit cards to avoid these fees. Moreover, they are twice as likely as average to call up their credit card issuers to successfully negotiate lower interest rate or fee charges to their account.

Whether the credit card resurgence among young consumers means that they will fall into the same debt traps as previous generations is unclear, Augustine said.

They also offer older adults an important lesson in dealing with credit card companies: always negotiate.

For more information on the Mercator Advisory Group CustomerMonitor Survey Series reports, please go to www.mercatoradvisorygroup.com/PrimaryData.

Overview by Karen Augustine, Manager, Primary Data Services at Mercator Advisory Group

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