According to recent data from FICO, the effects of the recent recession may have dramatically affected how young adults finance their purchases. According to the data, about 16 percent of consumers between the ages of 18 and 29 did not have a credit card as of the end of 2012. In contrast, only eight percent of young adults could say the same five years earlier. Instead of credit cards, young people are opting for debit cards.
In addition to the use of credit cards, credit card debt has dramatically declined for this age group. In 2012, the average young adult had about $2,087 in credit card debt. Five years earlier, most had $3,073.
Experts speculate that this trend may suggest that history is repeating itself. The Great Depression of the 1930s, encouraged those who lived through it to be more wary about taking on debt. Experts say that the recent recession may be having a similar effect on today’s young people.
This trend is also attributed to the passage of the CARD Act in 2010. This act made it harder for those under age 21 to qualify for a credit card, as it required them to have a co-signer and a sufficient income to pay off the balance.
While it is encouraging to hear that many young people are staying away from debt, that is not the case for older Americans. The same study showed that debt among those over 40 has increased. For people in this situation, bankruptcy can provide a fresh financial start by eliminating credit card debt, allowing the person to start over with a blank slate.
Source: CNN Money, “Young Americans are ditching credit cards,” Blake Ellis, June 14, 2013