The millennial generation is forgoing using credit cards, a situation that is causing problems in the industry.
A new survey by Bankrate.com found that only one out of three Millennials carries a credit card. That is significantly less than the older Baby Boomer and Generation X demographics, the majority of whom have at least one credit card if not multiple cards. In addition, a survey by the U.S. Federal Reserve found that the 18 to 24 year old demographic preferred to pay cash more than other groups rather than rely on credit cards.
These survey findings do not bode well for banks such as JPMorgan Chase & Co. or payment networks such as Visa and MasterCard,. The 2008 global financial crisis and ballooning college tuition may have also scared some Millennials away from credit cards, the Bankrate.com survey found.
In fact, Millennials are already in debt with student loans. About 41% of them held such debt, according to a 2015 Pew report. That compares to, at their peaks, 26% for Generation X; 13% for Baby Boomers; and 3% for the Silent Generation. And the burden is heavier on Millennials too: From 1990 to 2015, student debt for the typical college bachelor’s degree increased about 164%, according to Education Department data.
TransUnion confirms Millennials carry fewer credit cards and have lower balances than Gen-Xers did when the latter group was aged 21-34, thanks in part to legislation limiting the marketing of credit cards on campus and the subsequent boom in the use of debit cards. Millennials have also increased the use of auto and personal loans, TransUnion found, at the expense of credit cards.