The past few years have been pretty tough for many Americans’ finances. The Great Recession of ‘08 led to a drastic increase in foreclosures, job cuts for experienced professionals, and a near impossible job market for new graduates. And now, 5 years later, though many are still struggling with debt and worries about future retirement, positive signs are emerging.
As they say, what doesn’t kill us makes us stronger; and recent data shows that Americans’ finances – and financial habits – are getting stronger after years of struggle and lessons learned.
Millennials Avoiding Credit Cards
The first sign of positivity after the most difficult recession since The Great Depression is that young Americans are being more conscious than ever about their finances – especially when it comes to debt. In fact, according to CNN Money, 63% of millennials don’t have a credit card.
In other words, 6 out of 10 millennials don’t have any credit cards.
This data comes from a Bankrate survey of over 1000 people and highlights an ongoing trend:
Given the way credit card debt can set your finances back for years to come (not to mention the opportunity cost of monthly payments that could have gone to savings instead), this is pretty good news. However, CNN Money cautions that this could cost millennials a chance to build credit – if the use of their credit would have been “responsible” (in other words, balances paid in full each month). And since many millennials live in financial fear after what they saw in ‘08, this is a good point to make.
However, there is a way for millennials to responsibly build credit that doesn’t involve the dangers of falling into credit card debt. In fact, it’s something they’re already dealing with anyway:
Student loan debt
Building credit doesn’t just come from credit cards – it comes from all types of debt such as student loans, mortgages, and auto loans. And since many millennials are already battling student loan debt, they can use that as an opportunity to build their credit.
The key is to make on time payments, every time. Credit scores are based on various factors, of which your payment history makes up 35%. So simply never missing a payment can help you increase your score.
So fear not, millennials. You can build credit using the debt you were already paying off without worrying about the dangers of credit cards turning into credit card debt.
Bankruptcy on the Decline
Millennials avoiding the dangers of credit card debt isn’t the only good news since the Great Recession of ‘08. Bankruptcy filings are on a major decline:
“U.S. bankruptcy filings totaled 75,170 in August, down 16% from 88,962 in August 2013. It’s the largest year-to-year drop so far in 2014, according to data from Epiq Systems Inc…
‘The prolonged drop in bankruptcy filings reflects the financial landscape facing consumers and businesses,’ said ABI Executive Director Samuel J. Gerdano. ‘Amid sustained low interest rates and high filing costs, total bankruptcies for the year will fall below 1 million for the first time since 2007.’” — Collections&CreditRisk
The Future Looking Positive
The economy is constantly changing so all good news should be taken with a grain of salt. Hopefully, adults facing fewer bankruptcies and young adults avoiding the perils of debt points to a brighter future for all.
Image Credit: Leo Hidalgo