Unlike Our Parents, We’re Avoiding Credit Cards—But Is That a Good Idea?

Millennials were pretty busy in 2017: We supposedly killed dozens of industries, from casual dining chains to diamond engagement rings (and plenty in between). Our next apparent target? Credit cards.

A Bankrate survey found that just a third of us have one (compared to a majority of older Americans who do)—with many opting for prepaid and debit cards instead. A TransUnion study suggests this translates to millennials owning two fewer cards than older Gen Xers. Fewer cards equals less money spent in fees and interest—and lower profits for credit card companies.

Why cut out the cards?

There probably isn’t just one thing that set us on the path to becoming credit-avoiders—but a reluctance to rack up debt is probably the biggest factor. “Americans, broadly, have an uneasy relationship with debt,” says Erin Currier, project director for The Pew Charitable Trusts’ financial security and mobility project. “However, younger Americans seem to view debt more negatively.”

That’s likely because we have a lot of it—specifically student loans. The class of 2016 has it particularly rough, with an average balance of $37,000. When you’re already struggling to repay a five-figure balance—potentially delaying homeownership, marriage and starting a family as a result—it’s easy to understand why you might be skeptical about adding to the tab.

Then there’s the psychological trauma of living through the Great Recession (and graduating into a notoriously tough job market). “We’ve seen the negative impact credit has had on our parents’, grandparents’, siblings' and even our own lives. We’ve seen the housing crisis leave people underwater on their mortgages,” says Certified Financial Planner Josh Harris. “It would be hard not to have a bad taste in your mouth [about credit and debt].”

This actually sounds like a good thing…

Not exactly. Just because aversion to credit is understandable doesn’t mean it’s smart.

Credit cards are a tool. Like any tool in the wrong hands or being used irresponsibly, it can do a lot of damage. There’s a reason, after all, that you don’t use a chainsaw to cut an avocado. But used responsibly, credit cards (and chainsaws) have a lot to offer.

For example, responsibly handling a credit card helps build credit history, which can boost your credit score. A healthy score is often the key to landing better interest rates on other loans and mortgages. Plus, some credit cards offer valuable rewards—from interest-free balance transfers that can be used to pay down other debt, to rewards points and cash back and even complimentary car insurance, extended warranties and more.

So how do we strike the right balance?

A little education and a lot of discipline. Start by understanding, then implementing, some credit “best practices,” like setting up auto-payments to pay off your balance on time and in full each month and keeping your balance well below the card’s limit. (How much credit you’re using relative to the limit makes up a big chunk of your FICO credit score.)

If you’re not quite ready to jump into the deep end, ease into a charge-and-pay-it-off rhythm by limiting your card usage to one or two recurring expenses—say, your gym membership or Netflix account—so you can start building credit without overspending.

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