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More young people foregoing use of credit cards

According to new research by credit score provider FICO, more and more young Americans are choosing to forego the use of credit cards since the recession. In fact, the number of consumers ages 18 to 29 has reportedly doubled since the recession. Roughly 8 percent of consumers from this group had no credit card in 2007, but that number rose to about 16 percent in 2012.

As should be expected, credit card debt has decreased among individuals in this age group—by about one third, according to the research—going from $3,073 to $2,087 per person. FICO suggests that part of the reason for the change is that watching their parents’ struggles with the recession, younger Americans are more cautious in their use of credit. 

Prepaid debit cards, an alternative to borrowing money, are apparently gaining popularity, though. Such cards have been heavily marketed to young people in recent years. In addition, the decrease in the use of credit cards is also likely the result of the CARD Act of 2010, which requires consumers below the age of 21 to obtain a co-signer or to earn sufficient income to make full payments. This has made it more difficult for young people to obtain credit cards.

Other forms of debt—from mortgages in particular—have also decreased among younger Americans, though not student loan debt, which recently surpassed the amount of credit card debt nationwide.

Managing debt can be a real challenge, particularly for young people hit but a difficult economy that offers little or substandard opportunity. For anybody who struggles with debt, it is important to understand the options available to them, including the last resort of bankruptcy.

Source: CNN Money, “Young Americans are ditching credit cards,” Blake Ellis, June 14, 2013. 

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