Matt Palla is a local 28-year-old bartender who does not have a credit card, and no desire to get one.
“I spent money I didn’t have. I learned my lesson the hard way. I learned that if I don’t have the money to pay for something right when I want it then I don’t need it until i can save up and buy it at the right time,” Palla said.
Palla isn’t alone. A Bankrate survey, compiled by Princeton Survey Research Associates International that released last month, showed that 63 percent of Millennials — ages 18-29 — don’t have a credit card. Compare this to 35 percent of adults over the age of 30 who don’t have a credit card.
Lack of education and practice with credit and money management for Generation Y may contribute to the fewer credit cards in use by the generation.
“Credit cards are scary. I have a debit card and that is still sort of scary,” Kathryn Casello, 19-year-old and former Northern Light features editor said.
Speaking from experience, Becky Heath got a credit card in college as part of her student bank account. Beginning with a small limit, it increased as her credit improved.
“I needed a way to build up good credit and a credit card — if used right — is an easy way to do that,” Heath said. “Problem is, because it’s so easy it also gets quickly abused and can damage credit as fast as it can build it. Many people are afraid of credit for this reason and avoid credit cards or any debt for that matter. Personal finance is an area most of us Millennials have very little education or understanding of. Finance, credit, budgeting are all skills that need to be taught and educated on.”
While there’s no one reason so few Millennials own credit cards, it can be related to economic crisis’s that Generation Y lived through. Professor and chair of UAA’s sociology department Chad Farrell says one potential explanation for few Millennials owning credit cards might be what demographers refer to as a cohort effect.
“This occurs when a group of people [cohort] have some shared experience that has a common effect across the group,” Farrell said. “It can be especially strong when the experience occurs during the transition to adulthood. Young adults make up a cohort that came of age during a time of great economic turmoil and uncertainty — Great Recession, 2008 housing crash, etc. These experiences during their youth may have had a lasting effect on their attitudes toward debt, including credit cards.”
With shared experiences of national and worldwide economic crisis, Millennials may have also experienced financial stress closer to home that has deterred them from getting involved in accruing debt.
“I don’t have a credit card because I’ve known some older people who relied on them and found themselves in trouble. I have been using a debit card for a few years now. I think that I will get a credit card sometime in the future, if for no other reason than to build credit or earn airline miles,” Matthew Newkirk, a 20-year-old logistics student said.
Some credit cards offer great benefits and can be rewarding if used safely and correctly. Zee McCummings takes advantage of the Alaska Airlines credit card, which not only builds her credit, but also gives her travel benefits.
“I have two credit cards: one through AKUSA, my bank, and Alaska Air. AKUSA was my first one and the one I used to build my credit. Alaska Air was because I wanted miles, and generally I use it for bigger purchases, and my AKUSA one for small ones,” McCummings said.
Student cards are also a popular option for cash-strapped Millennials.
“I have two credit cards because I wanted the travel benefits from the Alaska Airlines credit card and the Capital One student card I have has no annual fee and no interest charges. For me, it was a way to explore finances and have something for emergencies without being able to take on too much debt (even if I maxed out both cards, I would be about $5,500 in debt, which is way more than I ever want but not the end of the world). I’ve gotten a lot more confidence from having it,” Abby Slater, a journalism student said.
In a world where credit is required to make big life purchases, Millennials will more than likely be forced to use credit.
Krystal Zickefoose is a 30-year-old Wasila resident who was pressured to get a credit card at 18. Cancelling her credit cards when her debt became out of control, Zickefoose struggled to pay off her debt. At age 28, Zickefoose suffered from pneumonia so severe that it left her in a coma for nearly two weeks. The pneumonia escalated to acute respiratory distress syndrome, leaving her with her chances of survival at less than 20 percent. Zickefoose was then forced to get a credit card to cover her medical expenses. Since paying her medical expenses, Zickefoose has cancelled her credit cards once again and has been struggling to pay her debt.
“Due to continued medical problems as a result of the initial trauma, I had no choice but to use them to survive, and again, I have cancelled them and am unable to make payments. Between the medical bills, my inability to work and credit cards, I fear I may have to file for bankruptcy in the future,” Zickefoose said.
In a society where credit is equivalent to trustworthiness, debt-conscious Millennials who divert from plastic will have to find more creative ways of building credit, or risk the chance that is taken when card use goes beyond their control.