Pros and Cons of Not Having A Credit Card (Follow-up to Question of the Day)

Sep 10, 2014

Good article to have students read as a follow up on the NGPF’s Question of the Day from earlier this week about the percentage of Millenials that DO NOT have credit cards.  Turns out the number is approaching 2/3.  NY Times story asks the follow-up question about the pros/cons of not having a card:  

More than 60 percent of millennials — defined as those age 18 to 29 — said they did not have a single major credit card, according to a survey published this week by In contrast, 35 percent of adults over 30 said they had no cards. (For the survey, Princeton Survey Research Associates International interviewed 1,161 people by telephone in late July and early August. The margin of sampling error is plus or minus 3 percentage points.)

The biggest con is that without a credit card, you may lack a credit history which will make it difficult to borrow:

“It’s hard to underwrite an applicant who has no credit history or credit score,” said John Ulzheimer, a credit expert for Credit Sesame. You might end up paying a higher interest rate, or even have your application declined, he said.

Experian released some data that said the average credit score for 18-34 year olds is about 620 which borders on subprime which only reinforces this point about the need to develop a credit history.  

Student loans (about 2/3 of recent graduates have them) also help students develop credit history and a great suggestion not mentioned in the story is to start paying interest on your loan WHILE you are in college.  While these payments are not required, they tend to be small (4.6% interest X $5,000 loan equates to about $20/month payment) and can also start building a student’s credit history.  



About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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