Millennials buck credit cards but miss out on building scores
Posted December 28, 2016
As millennials get older, they continue to shrug off trends of previous generations, and that includes the adoption of credit cards. More and more millennials don't own one.
Experts say while foregoing a credit card might sound smart, it's actually a big mistake.
Nolen Riedel is working his way through college and is very careful with his money. The 19-year-old says he doesn't want to risk getting a credit card.
"I've seen some friends rack up a lot of debts that they can't pay off, and I don't want that to be me," Riedel said.
Not having a credit card can hurt you in other ways, though. Using a credit card to build a high credit score is critical.
"Your credit score figures into all kinds of financial transactions—getting a mortgage, auto insurance, a car loan. And you can't have the best credit score unless you responsibly use a credit card," said Consumer Reports' Tobie Stanger.
Consumer Reports says to aim for a credit score of around 650 or higher. Credit card use accounts for about 30 percent of that score.
"To get the best credit score you have to pay all your credit card bills on time and in full," Stanger said.
To avoid credit card pitfalls, set up payment alerts on your smartphone, and don't keep your credit card information on file with retailers, which can make it too easy to click and buy.
Riedel acknowledged he needs a credit card to build his credit score, but for now he's using cash or his debit card for everyday purchases.
The other benefit of credit cards is that they have important fraud protections that debit cards and other forms of payment may not.