Most millennials avoiding credit cards

Seeing their parents struggle through the financial crisis, and then coming into the working world with limited job prospects while carrying high student debt, has left many of these young Americans fearing the risk of paying with plastic. 

Of the few millennials that are choosing credit cards, only 40 percent are in the habit of paying off their balance every month. Most Americans over 30 (53 percent) pay off their monthly balance in its entirety. 

Without credit cards, it can be difficult to build a healthy credit rating. The Bankrate report details the conundrum of one Dallas-based millennial who struggled to get a $5,000 car loan from a bank, even though he had $30,000 in savings and was making $60,000 a year. 

The millennial had avoided credit cards in an effort to be frugal, and learned the hard way that going into debt proves you can pay it off, and that’s what lenders are looking for. 

According to Experian, a financial information services company that provides credit scores, the average credit score for millennials is 628, which is considered subprime by most lenders. Baby boomers have an average score of 700, and Gen Xers average 653. 

Millennials who try to save money by not carrying credit cards will see their credit rating drop because of it, and that will ultimately make the cost of getting a loan more if and when they do seek one out. 

“Millennials have to understand that it costs you money not to use credit just as it costs you money to use credit,” Mike Sullivan, director at Take Charge America, a nonprofit debt-counseling agency, said in the Bankrate study.