Even though mobile payment and credit card companies are attempting to gain popularity with younger consumers, they may be missing the mark. According to a new report from credit score provider FICO, more consumers ages 18 to 29 are hesitant to sign up for credit cards and accumulate debt. As millennials choose to stick with traditional forms of payment, businesses they frequent may need to upgrade their cash counting machines to more effectively process these transactions.
Drop in card use, debt
FICO data revealed more young people have chosen to forego credit cards since the economic downturn impacted many Americans. While a mere 8 percent of young adults didn't have credit cards in 2007, that number doubled to about 16 percent at the end of 2012.
The decline in the number of millennials who rely on credit cards has also substantially impacted debt levels among younger consumers. The data showed overall credit card debt has dropped among this age group - from an average of $3,073 in 2007 to about $2,087 today.
Reasons for the decline
It's speculated the recession may have played a big role in turning younger generations away from credit cards. FICO officials believe many youths watched their parents struggle with subprime mortgages, high levels of debt and low wages throughout the recession and are unwilling to put themselves in similar positions. Because many college graduates are struggling with high student loan debt, they may be especially wary of spending excessively.
However, the economic downturn isn't the only factor that prevented more young people from getting credit cards - the Credit Card Accountability Responsibility and Disclosure Act could also be fueling the trend. The CARD Act made it more difficult for individuals under 21 to obtain credit cards, which could explain some of the drop in young adult credit card use.
Businesses look to better handle cash
As young people rely on credit cards less frequently, they may turn to a less risky form of payment - cash. Paying with currency allows millennials to make outright purchases immediately, without accumulating interest or worrying about making payments in the future. With the drop in purchases made with plastic, business owners may find it beneficial to upgrade their current cash counter to speed along transaction processing, spend less time on backroom operations and spend more time on the sales floor with customers.
July 10, 2013