Consumers Ditching Credit Cards

Sep 24, 2013 by

credit cardsHere’s an interesting infographic from CreditCards.com. Since 2005, Americans of every age—but especially Millennials—have steadily been ditching credit cards! Check it out:

CreditCards.com infographic: Young consumers ditching credit cards

Yay for Generation Y!

The percentage of consumers in the age cohort marketers have dubbed the Millennials, or Generation Y, who do without credit cards nearly doubled from 2005 to 2012. Wow! If the trend continues, soon 1 in 5 of these savvy young people will be card-less. The executives at Capital One may differ, but I find this trend exciting and hopeful!

Why Are More Millennials Making Do Without a Credit Card?

What’s the reason for this trend?

One theory is that the CARD Act of 2009—which requires credit card applicants under age 21 to either have a parent/guardian co-signer or show proof of sufficient income—has boosted the portion of Millennials without a credit card. I suppose that theory could have some merit, but mostly I don’t buy it, for two reasons: the CARD Act didn’t go into effect until February 2010, and the fraction of parents refusing to co-sign young Jacob’s or Hannah’s credit card application I think would be quite small.

What About Technology?

The infographic neatly shows that the rate of credit card abandonment falls as age increases. And I think we also know that, overall, the older we get, the less aggressively we tend to learn and adopt new technologies. (Heck, we still have cable! 🙂 ) Maybe Gen Y-ers find using a smartphone app a lot more convenient and sensible than old-fashioned credit cards. And services like PayPal and, in Canada, Interac are increasingly available to make purchases that one once needed a credit card to make.

Smart Young People?

The world’s awash in debt at every level—personal, public, and corporate. I suspect many Millennials wonder how and why previous generations left such a financial mess for them to deal with. And witnessing the 2008 financial meltdown’s effects on their parents’ jobs, home values, and retirement nest eggs probably scared the bejeebus out of Gen Y. They may be getting the message: Going into debt to live beyond one’s means is a risky plan! In short, Millennials may have learned from the financial carnage they’ve witnessed and are making smart money choices as a result.

Student Loan Debt?

Loaded down with debt after finishing school and entering a less-than-vibrant job market, many Millennials may simply be loath to take on any more debt or any means that might lead to more debt. Also smart.

Trend Persists Across All Age Cohorts

Though most dramatic with the Millennials, the graphic shows the trend of rising freedom from credit cards across all age cohorts. So something’s going on that’s not unique to young people. Surely the meltdown, home value & stock crashes, and Great Recession put a healthy fear of debt into a lot of people’s minds, young and old. But what else?

What do you think are the factors behind the growing abandonment of credit cards? And have you given up credit cards totally?

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