Student Credit Card Usage
For many consumers, having and using a credit card is a typical form of payment. But, this might change as new data is showing that fewer younger adults are choosing to open a credit card than in the past. While this could mean more people might have a harder time getting a mortgage or convincing landlords they are worthy tenants, it’s also likely the industry will shift as well, to accommodate for other forms of credit history data.
Specifically, a Bloomberg article cited a Sallie Mae study that found that 39 percent of undergrads between the ages of 18 and 24 had a credit card in 2012, compared to 49 percent in 2010. Of those who do have credit cards, the average balance has also fallen in that time. Falling credit card debt is also a trend for all users – the debt fell in the fourth quarter of 2011 to 2012 – but is larger for those under the age of 35.
There are a number of reasons behind this trend. The Credit CARD Act made marketing to college students harder for credit card companies, more banks were less willing to give credit cards than in the past after the financial crisis, and for many after the recession, a credit card just sounded like more debt.
While not having a credit history from a credit card is making it harder for young adults to apply for mortgages or other loans, with so many turning away from this form of credit, landlords and lenders are beginning to comply. Many young adults have mobile phone bills or a history of paying other bills, and using this form of data, through risk assessment tools may be more common. With alternative data, banks have a better picture of their client, and lenders have more options.