Credit Sesame Survey: What Would Entice Millennials to Open credit cards? – Credit Sesame
Credit Sesame recently polled 1,000 young adults aged 18 to 34 and found that just about 60% of them said they don't possess a credit card, citing debt because the main reason why they decide to prevent them.
It appears Millennials associate the use of credit cards with debt. While it’s understandable, it’s important too to note that debt can be controlled if you use them responsibly and pay them entirely, each month. Avoidance seems to be the answer for 60% of Millennials we surveyed, even though using a credit card responsibly might help build your credit, which betters your odds of obtaining a lower rate for things like a home loan or car. Good credit is also a factor when you want to rent a condo.
Not that, this group is missing out on charge card rewards, which can earn them free flights and cash back for things they’d put money into anyway.
Our survey asked Millennials what would motivate them to open credit cards. Answers included things like a far more robust rewards program and more consumer protections. Find out what Millennials really think about credit cards and just what would entice them to open one.
Credit Avoiders Aren't Prone to Change Their Habits Whenever Soon
As a part of our survey, we asked Millennials who didn't have a credit card what (if anything) could persuade these to want credit later on. 4 % said plain they didn't desire a card. The general results show mixed responses across the board.
- 22% said they may consider credit if they could pick and choose their own annual percentage rate (APR) or spending limit
- 13% said an ample rewards program could sway them towards credit
- 8% voted for better consumer protections
- 7% chose better customer service
- 45% didn't pick any of those incentives at all
Essentially, Millennials who aren't using credit cards don't seem like they're really missing out anything plus they aren't wanting to change their minds.
They're not quite thrilled concerning the concept of finding yourself in debt.
Most Millennials Create a Conscious Option to Ditch Credit Cards
As mentioned earlier, 60% of the Millennials we surveyed said they did not possess a single charge card. Sixty-one percent of those that posess zero card say it is because they not apply for them. Twenty-four percent said they'd had a card in the past but did not have it anymore. Just 15% said they'd enjoy having credit cards but had been denied for one.
The majority of Millennials aren't piggybacking on anyone else's charge card accounts either.
Here are a few results from our survey:
- 7% who did not have credit cards said these were currently listed as an authorized user on the parent or spouse's account
- 20% said they'd been an authorized user at some stage in the past
- 73% said they'd never been put into anyone else's account
So not only are teenagers not getting cards of their own however they are not taking benefit of one of the main advantages of becoming an authorized user: establishing their credit ratings. When you're a certified user, all of the activity for your account turns up in your credit history. That means even if you avoid using the account, you still get the advantage of the primary card holder's positive payment history, assuming they're while using card responsibly.
Considering that payment history makes up about 35% of the FICO credit score, that's a huge benefit that Millennials aren't benefiting from because of their perceptions about credit cards and debt.
Credit Card Companies Score Low on Trust among Millennials
In our survey, 44% of respondents who didn't have credit cards said they didn't trust credit card companies whatsoever. Thirty-six percent said they didn't consider these to be consumer-friendly on any level.
Interestingly, the trust factor doesn't seem to climb that much for Millennials that do use credit cards. Just 7% of the people in our survey who said “yes” to presenting credit said they trust credit card companies completely. Fourteen percent said they do not have confidence in them whatsoever. The remainder were more or less undecided about how trustworthy credit card issuers really are.
Card issuers didn't fare much better for friendliness either. Just 11% rated credit card companies as very friendly while 6% said they didn't find them to become friendly in the least.
Those attitudes align using the overall perception that Millennials seem to have of debt and the financial services industry generally. According to the Millennial Disruption Index, 71% of 18 to 34-year-olds would rather go to the dentist than pay attention to anything their bank says. After seeing the fallout in the financial crisis of 2008-09, it is no surprise that Millennials are leery of credit but again, that distance has a cost.
Credit Sesame data on generational credit trends shows that Millennials possess the lowest average credit scores when compared with Gen X or Boomers. Our data further shows that Millennials who have credit cards have higher credit utilization ratios than their older counterparts. Their average balances are lower but because their credit limits will also be, their scores ultimately suffer.
Credit utilization counts towards 30% of your credit score. Low balances, dollar-wise, don't help when the limits will also be low. In this way, Millennials could be penalized score-wise even if they use credit responsibly, so it's no wonder there is a distrust of credit card companies.
What it comes to is that this: Millennials overwhelmingly see credit cards like a vehicle for falling into debt, rather than a useful tool for building their credit history. The things they overlook, however, is always that bad spending habits, not charge cards themselves, are what ultimately lead some credit users into debt.
As long as Millennials continue to associate charge cards with debt, it's likely that they'll steer clear of credit products. That can be a might keep them from accumulating big credit card debt, the downside is that it'll probably take more time to develop healthy credit scores. If a mortgage or auto loan is on the horizon, desire not to want credit cards now could return to haunt them later on.