Report shows fewer young adults turning to credit cards
When you think of young Americans, you may think that they love to use credit cards to finance their insatiable appetite for the latest gadget or fashion item. Although this is true in many cases, new data had shed new light on how young adults are using credit.
According to data from FICO, the creator of the FICO score that is used in credit decisions, fewer young Americans are using credit cards. The data indicated that in 2012, 16 percent of those in the 18 to 29 age group had no credit cards at all. As a comparison, a mere 9 percent could say the same before the recession hit in 2005.
Not only are more young adults eschewing credit cards, but many are also reducing their reliance on credit to finance their purchases. According to FICO, the average credit card debt among young adults fell to $2,087 in 2012 from $3,073 from 2007. Although it may seem that the debt load among young adults is lessening, this is not the case. Student loan debt has increased dramatically from an average of $6,500 in 2007 to $11,500 in 2012.
Why are young adults turning away from credit cards? Financial experts say that part of the reason is the passage of the Credit Card Accountability Responsibility and Disclosure Act in 2009. This act made it more difficult for those under 21 to qualify for a credit card, as it required applicants to have a co-signer or a minimum level of income.
In addition to the act, experts say that the trend can be explained as a sign of the tough economic times. Like the Great Depression caused an entire generation to tighten up their purse strings, the recent recession has encouraged young adults to be more cost conscious in their day-to-day lives.
Bankruptcy can help
Unfortunately as today’s youth have become more responsible financially, the FICO report shows that credit card debt has increased among older Americans. For many in this situation, bankruptcy can offer a solution.
Under the bankruptcy laws, unsecured debt such as medical bills or credit card debt can be eliminated entirely. Regardless of whether Chapter 7 or Chapter 13 bankruptcy is filed, the bankruptcy filer receives a discharge of such unsecured debt, relieving his or her obligation to repay it.
Although it may seem like a panacea for all financial ills, bankruptcy should not be filed on a whim. It is important to do so only after consulting with an experienced bankruptcy attorney. An attorney can inform you of your debt relief options and recommend one that would be best for your situation.