Spooked by the possibility of debt, young adults are sidestepping credit cards

Posted at 6:34 AM, Oct 26, 2017
and last updated 2017-10-26 07:15:40-04

CINCINNATI -- Millennials may be stereotyped as entitled, technology-hungry job-hoppers, but one descriptor they refuse to add to the list is "in debt."

Young adults ages 21-37 are saying "no" to credit cards, according to a recent Bankrate study.

A mere one-third of millennials say they have a credit card, compared to over half of people ages 30-49 and nearly 70 percent of people over 65. These alarming numbers have Gen Xers and older adults questioning the decisions of the younger generation.

The main deterrents for credit card use could stem from millennials watching parents, relatives and friends endure the recession of 2008 or from the immense amounts of student loan debt facing their generation. The title of a recent Fox News article, "50% of millennials would give up their right to vote to get student loans erased," attests to the level of stress they are feeling about student loan debt.

So, what's a millennial to do? How will they build credit to buy a house, a car or a boat to get away from their tech-filled lives?

Jess Lehmkuhl, 30, a mom of two toddlers in Northern Kentucky, is an avid follower of Dave Ramsey, who proposes that "you don't actually need credit." She and her husband have one credit card that they used to fix up their house when they bought it. They have the intention of closing the card when they pay off the repair costs.

"Credit cards just get us in trouble. I love the idea of working hard to save money to purchase something I want or need. There's a sense of accomplishment and it helps us teach our children that we can't always have instant gratification -- while we are learning it at the same time," Lehmkuhl said. "We use cash for everything except our bills. When you physically hand over your money to someone to pay for something, it makes you appreciate money more."

A common argument for having a credit card is that it's there in case of emergency, but Lehmkuhl doesn't see it like that and instead relies on her emergency fund of a couple thousand dollars. She'll soon be working on three to six months of expenses in that emergency fund.

"While I understand emergencies happen, when you're using credit cards, it's not extra money," Lehmkuhl said. "It's money you don't have."

Another concern millennials may face without a credit card is, of course, building credit.
Nathaniel Meyersohn wrote in CNN Money that for young adults, credit cards and student loans are typically the first and only things that show up on their credit reports.

"If you don't have enough credit history, you might not even have a credit score," Meyersohn wrote. "A strong credit score not only helps you get a loan, it'll secure you better interest rates and save you money in the long run."

Courtney Patrick, 22 of Monroe said she uses credit cards often because "credit is what makes or breaks you."

The new mom credits her successes to her grandfather, who first helped her manage a credit card at age 18. After a few months under his wing, she was on her own and she said now her credit is "amazing."

"By putting something on a card and then paying it off, I am building my credit. I choose to do this because I know I have the cash to pay it off in a timely manner," she said. "I think some people don't use them because they aren't educated enough on them."

Patrick has concerns about millennials choosing not to have credit cards.

"I just think it's hard to become established. It's hard to get a home loan, car loan, etc. on your own. They are still able to do these things but they will probably have to pay all cash for it," she said. "I don't think it's a bad lifestyle, I just don't have the patience to wait that long for things I want."

Jess Akers, 29, of Bethel is a self-proclaimed millennial with "about 10 credit cards and almost excellent credit." She uses credit cards to buy time for large purchases, such as her $6,000 Sleep Number bed, financed with a card at zero interest for 12 months.

At the end of 12 months, she transferred the balance and opened another zero interest card for another 12 months.

"You definitely have to be smart about it," Akers said.