Once derided on the cover of Time magazine as the “Me Me Me Generation,” millennials have, in fact, become the “Owe Owe Owe Generation.”
This group originally showed a healthy aversion to credit card debt. From 2008 to 2012, only 41% of those in their 20s had a credit card. That number has grown to 52%, as millennials seem to be succumbing to our credit-crazed culture.
Unfortunately, a large percentage are mismanaging that debt. To that point, 8% of millennials’ card balances were seriously delinquent in the first quarter of this year, according to the New York Federal Reserve Bank. That is by far the highest for any age group.
Millennials are already saddled with $370 billion in student loans and have lower net worth than their predecessor generation at the same stage in life. They obviously can ill afford to be taking on this additional financial burden.
Credit card debt is the worst kind of debt. It’s high cost — the average card currently carries a 17% interest rate — and earns little in return.
Of course, there’s good debt. Other forms of borrowing can make economic sense. A student loan can be a good investment, as a degree from a quality college can add substantially to lifetime earnings.
However, carrying balances and letting accounts become delinquent, as millennials are increasingly doing, is financial insanity. Once you fall behind on card payments, it’s hard to dig out.
A recent survey by the Financial Industry Regulatory Authority Foundation shows that 60% of credit card borrowers between the ages of 18 and 34 carry sizable balances, pay late fees or engage in other costly credit card behaviors.
Card delinquencies can also severely damage a borrower’s credit score, leading to higher rates on other borrowing, such as a car or home loan.
Yet, it is no wonder that millennials are ill-equipped to understand and manage debt….Read more>>