Credit Cards

Avoiding Credit Card Debt As a Recent Graduate

Credit CardsA recent article in the New York Times delves into the changing trends among the younger generations and their dissociation with credit cards and the crippling debt that follows. FICO,  one of the largest analytic software companies in the US, conducted a study aimed at understanding the decline of credit card usage among the ages of 18-29. They found that from 2005-2099 there was a 7% decrease in credit card purchases.  The study also recognized that older generations are relying less on credit cards, but not with such drastic numbers.

These changes in consumerism have contributed to reductions of the average credit card payments, which dropped from $3,073 to $2,087 in late October of 2013. Despite these changes in credit card debt, this generation is experiencing a devastating increase in loans, which have almost doubled in the past decade. Another reason this age group prefers to use debit cards which make it easier to face for them to face their debts and live comfortably.

There are a few reasons behind the declining trends of credit card usage. In 2009,  the introduction of the Credit Card Accountability Responsibility and Disclosure Act was introduced to the public, and it added amendments requiring applicants to have a stable income stream, which in turn made it more difficult for younger people to become approved for credit cards.

Spending habits among younger generations have also changed due to the Great Recession, and their inability to work full time after finishing school. Financial burdens, such as loans and increasing living standards across the US have made young consumers become aware of the overall economy struggles and their personal financial shortcomings.

Many financial analysts believe that without credit cards this age group will have a difficult time building credit and purchasing future big ticket items such as, a car or a home. However, for those who still cannot afford credit cards, there are other ways to acquire credit. For example, making your regular loan payments on time, and signing up for bills in your own name can help you slowly create a solid credit history. These simple exercises can place students and recent graduates in a good place with their future finances, without rushing into unnecessary credit card debt.