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Sometimes I Feel Like the Only 20-Something with a Credit Card

Kristin McGrath

June 28, 2013

In a room of fully employed late-20-somethings, I was the only one with a credit card.

There were seven of us gathered for a birthday party. We were talking about our jobs, which led to talking about my job at a credit card and personal finance website. One friend admitted he didn’t have a credit card, and gradually, everyone else in the room declared, “Me neither.” One person had opened a Macy’s credit card to get a discount a year back, but had closed the card. Another was an authorized user on her mother’s account “for emergencies,” but never used the card.

The reasons my friends gave for eschewing credit echoed one other: “I don’t trust myself.” “My parents got into trouble with credit cards.” “I have a debit card.”

Do I just run with an anti-credit crowd? Well, because I hang out with 20-somethings, it turns out I do, based on some June 2013 numbers from FICO. According to the credit scoring firm, outstanding debt on credit cards held by 18- to 29-year-olds dropped by nearly one-third between 2007 and 2012.

On the surface,  that looks like a good thing — young people are paying down their balances. Yet, there’s another factor at play, according to FICO. That lower average balance is partly due to more young consumers not having any cards at all. Since 2005, FICO has tracked an increase in all age groups in those who don’t have any credit cards. Yet the increase in the 18-to-29 crowd is the most dramatic. In 2005, 9 percent had no credit cards. In 2012, that percentage nearly doubled, reaching 16 percent.

My friends’ reasons for shunning credit were mostly rooted in fear of financial ruin, and recession-related credit shyness plays a big role in credit avoidance. A March 2013 Bloomberg News article points out that high unemployment among young people makes them less willing to do things that they deem financially risky — including getting a credit card. However, FICO points out that credit shyness is only one reason young people are steering clear of cards. The other reason is that issuers are less able and willing to extend credit to young people. The Credit CARD Act of 2009, for example, makes it more difficult for those under 21 to get a card without income or a co-signer.

Although many young people may pat themselves on the back for avoiding the credit pitfalls that dragged their parents into financial difficulties, being creditless could cost them. Landlords who can afford to be picky are using credit searches to screen applicants. Employers sometimes check applicants’ credit histories. And, even if young people can’t imagine owning a home or a car today, they might want to in the future — and depriving themselves of a decade or more of credit-building time could mean higher interest rates.

Want to build credit, but wary of plastic? There’s plenty of advice from around the blogosphere for young people:

The Dough Roller explains how you might be able to use on-time rent payments to build your credit.

Young Cheap Living emphasizes how important it is to make sure you’re really ready for a credit card before getting one.

Money Under 30 offers a list of credit cards that are a good fit for young people.

Green Panda Treehouse points out the most common credit mistakes young people make, so you can avoid them.

Modest Money suggests using a prepaid card as training wheels before moving up to a credit card.