Millennials don’t always know how to use credit cards in a world where ‘cash is inconvenient and plastic money is king’
As Bart Simpson perfectly demonstrated, children should not be allowed anywhere near credit cards. This might sound stupid, of course children should not be allowed credit cards, they don’t have a full grasp of how finances work and are more than likely going to treat credit as free money. Well according to new statistics, perhaps some millennials shouldn’t be allowed them either.
Recent findings from MoneySuperMarket found that youngsters applying for a credit usually have “no understanding” of what they will have to pay back but fall into the trap of buying things they can’t afford through the use of credit cards. Kevin Pratt from MoneySuperMarket stated that credit cards had become a “minefield” for many millennials “because they don’t realise what they will have to pay back,” reports The Telegraph.
To get a better understanding of why millennials don’t always know how to use credit cards and are often ill-informed we spoke with Drew Sementa, CEO of Tidal Commerce, a merchant services company based in Illinois, who said “It’s not surprising that the youngest millennials and Generation Z are having difficulty understanding credit cards. These people are growing up in a world where cash is inconvenient and plastic money is king. It’d be easy to conflate plastic credit cards with debit cards when all you see is plastic being swiped. You wouldn’t expect something so normal to have consequences, right?”
He adds “And credit card companies don’t have many incentives to teach people what they’re getting into, so I think that burden falls on parents and schools. Instead of just explaining compound interest in terms of financial markets, kids should have activities where they own a “credit card” and can “buy” class credit or some other good. Or on the flipside, they should do exercises explaining interest with cash to instill the impact of interest and weight of financial transactions. Parents can help by supervising their children’s first voyeur into credit as well, allowing them to make small mistakes but preventing them from falling too far down.”
But there are solutions claims Sementa as he advocates that “We should also think about improving policies that may protect new credit card users — perhaps setting lower ceilings on credit card limits and making it a bit more difficult to apply for credit extensions until a person’s credit card score and age go past a certain threshold.”
Evidently, there is a lot that millennials need to learn before taking out a credit card and using it freely. However, for those that decide to go on a spending spree using credit, this lesson on finance might turn out to be a very expensive one.