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Millennials and Credit Cards: Building Your Credit Score

  • By Credit Diva of Dallas
  • 13 Sep, 2018

Millennials are avoiding credit cards compared to older generations. Only one in three carry a credit card, which is about half as many as the older generations, preferring cash or debit cards. This shift in behavior is a result of the recession. Millennials were beginning careers or finishing school when the recession hit, and it affected their financial prospects and showed the damages of unmanaged debt.

Millennials are more likely to have student loan debt than their parents. The cost of tuition increased 164% from 1990 to 2015, so the value of the loans also increased. Even though millennials have more debt than their parents, it's still a good idea to start using credit cards early.

Credit cards-2

The benefit to using a credit card is to build a credit score. Two of the biggest things that affect credit score is a good payment history and the age of credit history. Credit cards are often the oldest item on a credit score, and if properly managed, a low monthly bill to pay. Using a credit repair service can help manage credit card debt if there's already bad payment history.

Having a good credit history will make it easier to get more expensive loans, like cars and houses. Banks look at credit history to see if they can approve a loan and it could determine the interest rate. They want to see if the applicant can pay bills on time and utility bills, rent, and cell phone bills don't show up on a credit report (unless they're past due), so credit cards are a necessity to start building a credit score. A low-interest rate on a mortgage could save tens of thousands of dollars over the life of the loan.

A woman smiling and looking in front of her as she uses her credit card with her laptop.

There are other benefits to having a credit card. Fraud protection is generally more favorable for credit card users than a debit card. It could mean the difference between being on the hook for $50 instead of $500. If you do your shopping online and store payment information, consider a credit card.

Many offer credit card rewards for using them, such as travel miles, cash back on groceries and fuel, or even electronics. You should match your card rewards to your spending habits, and don't chase rewards. That might lead to a credit card bill that you can't afford if you spend beyond your means.

Most millennials aren't using credit cards, but they should consider it, especially if they plan on owning a house or car. The benefits easily outweigh the cost. If you have bad credit or are looking to improve your credit, download this free checklist with steps you can start taking today to improve your credit score.

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