Your Money: Cash is king with millennials, but delays
adulting
Send a link to a friend
[April 11, 2019]
By Beth Pinsker
NEW YORK (Reuters) - Cash is king with
young people, but it is not helping them build a credit history or boost
their credit scores.
Among millennials aged 18 to 29, those with a college degree are the
savviest about using credit cards, according to a survey released
Wednesday conducted by Sallie Mae and Ipsos. As a result, more than 70
percent had decent credit scores above 650, with 40 percent in the
excellent range of 750 to 800.
By contrast, college students and those who never finished a degree used
credit cards much less frequently and had lower credit scores. Among
students, just 20 percent boasted excellent credit while the
non-completers had just 8 percent, according to the survey.
"Overall, they more frequently use a debit card. They are more
comfortable," said Marie O'Malley, senior director of consumer research
at Sallie Mae.
![](http://archives.lincolndailynews.com/2019/Apr/11/images/ads/current/elkhart_grain_daily_sda_022614.png)
While many young people use cash to keep themselves from building up
debt, they also are putting off some aspects of adulting. You need a
credit history to get mortgages or car loans, qualify for apartment
rentals and get some jobs. Credit scores even factor into dating
conversations.
Although debit cards can have credit card functions, they do not get
reported to the credit bureaus and, therefore, have no impact on your
credit score, said Amy Thomann, head of consumer credit education at
TransUnion, one of the three main credit reporting bureaus.
Here is how millennials can build a credit history:
* Get a credit card
Many of the young people in Sallie Mae's survey did not have a credit
card because they thought they would not qualify, but most probably
would. Young people can start building a credit history by being an
authorized user on a parent's credit card.
They can also pretty easily get a secured credit card, which are offered
by most major carriers, said Matt Schulz, chief industry analyst for
CompareCards.com, a division of LendingTree Inc. These cards function
akin to pre-paid debit cards. You put down a deposit that functions as
your credit limit, but you do not have to reload after each billing
cycle.
Most young people who have any kind of job will also qualify for a
regular, unsecured credit card.
If you are unsure, Schulz said there is no harm in applying for a card
and seeing if you are approved.
[to top of second column] |
![](../images/041119pics/busine31.jpg)
U.S. dollar bills blow near the Andalusian capital of Seville in
this photo illustration taken on November 16, 2014. REUTERS/Marcelo
Del Pozo/File Photo
![](http://archives.lincolndailynews.com/2019/Apr/11/images/ads/current/Rohlfs_lda_daily_SFARM_2017.png)
Keep in mind that the average interest rate for credit card balances are over 17
percent, and late fees can be up to $35.
"It might not have great terms, so keep your expectations low, but if you have
income, chances are you'll be able to find a card," Schulz said.
* Risk for reward
Most credit cards also come with cash back or travel rewards, which you can pick
depending on your preference.
You get more fraud protection if your card is compromised than with a debit
card. And you usually get things like rental car coverage, which can save you
the fee for the collision damage waiver, which could be $10 or more a day.
Most of all, credit cards do not have overdraft fees, which can be $35 a pop on
debit cards. Americans paid $34.3 billion in overdraft fees in 2017, according
to research firm Moebs Services.
* The caveats
Credit cards are a smart move for people who will pay off their bills each
month. Schulz recommends getting started by charging a recurring subscription,
like Netflix or Spotify, and then paying in full each month. Automate the
payment from your bank for an even more foolproof approach.
![](http://archives.lincolndailynews.com/2019/Apr/11/images/ads/current/amlegion_sda_FAIR_2017.png)
TransUnion's Thomann did this herself when she was first starting out. While her
company has a new product that will help walk young people through building
their credit as part of a $24.95 monthly subscription, she also recommends
making use of the free annual credit report available to all Americans (http://annualcreditreport.com)
to get your baseline.
(Editing by Lauren Young and Lisa Shumaker)
[© 2019 Thomson Reuters. All rights
reserved.] Copyright 2019 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
![](http://archives.lincolndailynews.com/2019/Apr/11/images/ads/current/ldn_medical_directory_small2.png) |