Gen Z Shuns Credit Cards


gen zThis post originally appeared on IndexCreditCards.

Do you remember the excitement you felt when your first ever credit card arrived in the mail? Chances are, your heart jumped as you felt the hard little rectangle inside the envelope, and perhaps you later stared at — and even caressed — the pristine plastic before turning it over and signing it. Getting your very own credit card was society’s way of saying you were an adult. It was a rite of passage, our equivalent of the cattle jumping ceremony practised by the Hamar tribe in Ethiopia.

Young Desert Credit Cards

But that (the card receiving, not the cattle jumping) is something fewer and fewer young Americans are choosing to experience, according to new research from FICO, the company behind the most commonly used credit-scoring technology. True, in October 2012, only slightly fewer than 16% of those in the 18-29 age group had no credit card, but the trend is startling: that’s very nearly twice as many as seven years previously, in October 2005. FICO’s data (which were published only in chart form, meaning the numbers read off are approximate) show a direct correlation between age and the likelihood of not having a credit card:

  • 18-29 years: 16%
  • 30-39 years: 8%
  • 40-49 years: 5%
  • 50-59 years: 4%
  • 60+ years: 2%

Card Issuers’ Long Term Viability at Stake

As importantly, those youngsters who still have cards are using their credit lines less. The average card debt for those aged 18-29 years in October 2012 was $2,087, compared with $3,073 five years earlier.

All of this must be causing sleepless nights for those who work in credit card companies’ marketing departments. The last thing most businesses want to see is a demographic profile that shows their most profitable customers dying off soon, while the ones with the potential to deliver profits for decades to come are shunning their products. Stand by for some aggressive innovation in this market. But what could tempt back the young?

  • Val

    The last thing I want right now is more debt. My student loans are about twice the national average and I’ll be paying those off for the next couple decades. Using debit instead of credit allows me to feel more repsonsible.

  • Guest

    Good. Credit is good to have for big ticket items like mortgages, student tuition and cars, but it makes no sense for day-to-day purchases. I am 29 and have one credit card with a modest limit (less than $1000). I use it for purchases at places I don’t want to use my debit (online stores, gas stations, etc) and then pay the balance in full twice a month. I wish more people would step away relying on credit for day-to-day purchases. The credit card companies suck money out of their users and often charge ridiculously high interest rates. I say let them go under.