Young adults are handling their finances and credit much different than from previous generations. Ninety percent of people between ages eighteen and thirty seven access financial information digitally straight from their smartphones. Eighty percent of these people make transactions from their smartphones. According to the Global Financial Literacy Excellence Center, their study discovered that most millennials use their phones for a variety of financial needs. These financial needs include keeping track of their spending, comparing prices, shopping and managing credit cards.
Millennial handle credit a bit different from their parents and grandparents generations. Many millennials are a bit skeptical when it comes to credit cards. Only one third of millennials admit to being credit card owners. Why so little? This age group admits to a having a fear of attaining debit that has caused them to refrain from owning a credit card. Millennials have spent the past decade or so seeing the people around them battle debit and have lived through the financial crisis of 2008. Millennials who have or are planning to accumulate student loan debt are not looking forward to racking up a huge balance on a credit card they will struggle to pay off.
But one thing former generations have gotten right about credit is how it can benefit a person. If done correctly owing some money and purchasing on credit does not have to be a poor decision. Financial literacy is key. This generation does tend to show a disconnect with financial literacy according to recent studies. One thing this generation may miss out on by opting out of a credit card is a lack of building a credit history. The pass two generations have primarily built their credit history due to having a credit hard. A strong credit history can lead to great opportunities like being approved for loans and cheaper deposits on apartments. Having a credit card also offers rewards. This generation may miss out on earning rewards from their daily spending that a credit card company will offer. Lastly, a credit card has always provided more protection from fraudulent activity than a debit card.
Retailers and lenders have created new ways to get the attention of millennials. They have created credit products that appeal to the shopping habits of today's generation. Venmo, SoFi and Starbucks are just a few companies that are creating ways to market credit in a more friendly and acceptable way to millennials who fear purchasing with credit. Point of sale loans are a common way lenders are getting the attention of today's spenders. These lenders break big payments down to smaller payments that appear more to younger consumers. Companies have even brought back layaway to entice people into the world of credit. Afterpay is something new big brand names like Anthropologie and Urban Outfitters have began for their shoppers. This is a form of credit that allows customers to get the items they want upfront and pay off later. This sits well with their customer base of a younger demographic.
Essentially, millennials just do credit differently. It is completely fair to understand why. These eighteen to thirty something year olds have grown up in an environment of economic volatility. They have seen their parents have to rebuild their lives after the real estate and economic crisis of the mid to late 2000s. But what will become of an economy without credit lending? Without credit, lenders are looking at a very different economy in the nearing decades. Credit may be a term not too popular amongst this age group. But credit has not disappeared. These young consumers just prefer different means and measures with different names other than credit. Layaway, afterpay and point of sale loans just may be the future of credit for millennials.