Since the recession of 2008, the number of people age 18 to 29 who do not have even one credit card in their name has doubled. Sixteen percent of young adults don’t use credit, according to a study by credit analyst firm FICO, which studies millions of credit report and assigns consumer credit scores. In 2007, only 8% of that same demographic did without credit.
Since they don’t use credit as much, debt has gone down as well among this new group of young adults. The average amount of credit card debt among the 18-29 set is now $2,087 per person, down from $3,073 in 2007. As debt has decreased, credit scores have climbed. The average credit score for this group has risen accordingly since the recession, with 11.2% having scores over 760. Anything over 760 is considered excellent credit. In 2005 only 8.6% of people ages 18-29 had excellent credit scores.
FICO researchers say this decrease in credit card popularity may be due to kids watching their parents struggle with heavy debt loads after the recession hit. Reluctant to rely on credit like their parents did, recent college graduates are opting to use prepaid cards and debit cards instead of credit cards.
Another factor is the Credit CARD Act of 2010, which made it more difficult for people under age 21 to get credit cards. Credit card issuers, which used to set up tables on college campuses and offer incentives for young people to sign up for their products, are now prohibited from marketing on campus. Students under 21 must also have a co-signer to open an account, something that was not required before the CARD Act went into effect.
With prepaid cards becoming more and more popular, even taking the place of traditional checking accounts, credit card use may continue to decline among young people, says FICO. As they become used to using available funds to make purchases instead of the “buy now, pay later” credit card model, credit cards may have to do more to attract younger customers. Things like travel rewards, cash back, and other incentives are one reason younger consumers may be tempted to sign up for credit card accounts. The popularity of mobile payments may be a factor in attracting this demographic as well, as credit cards adapt to the virtual wallet revolution.
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