Why Young Adults Are Keener to Using their Credit Cards

Understanding the answer to this question lies in tapping the consumers being subjected to it. To rephrase it, we need to understand first that who belongs to this faction of “young adults” and how does their thought process operate.

Who Are These Young Adults?

At present, the group of young adults is entirely composed of the people who have come through the millennial generation. This generation is a demographic cohort between Generation X and Generation Z, having their birth years somewhere between 1980s and early 2000s.

What Are They?

Millennials are looked upon as a generation of people who are highly ambitious and hold themselves in the highest of regard. Being brought up in age of recession and global economic crisis, they understand the need of managing finances correctly to have a better future. They are adaptable to their surroundings and proactive in their decision making.

How Being a Millennial Promotes the Use of Credit Cards

Ambition

Being ambitious means that millenials tend to part ways towards financial independency more quickly than any other generation. They want to have their own home, own car and want to secure their future by looking for investment alternatives.

In order to achieve all this, they need a healthy credit score and that is where their utilization of credit card comes in. The commodity is a smart way towards building an appreciable credit history, which can then be used to acquire bank loans, rent apartments, get car insurance and invest in a buy-to-let mortgage schemes.

Understanding of the Finances

Millenials are pretty shrewd when it comes to dealing with their financial matters. They know rewards and discounts are a great way towards building their piggy banks and they exploit credit cards to achieve this. These cards have offers like cash back rewards and discounts on regular monthly payments, which young adults or millenials use to add to their savings.

Being Proactive

In present age, the cases of thefts and frauds are being reported on regular basis worldwide. Carrying cash or using a debit card often leads to exploitation of the customer by these frauds. This forces the younger adults to be proactive and adapt. They prefer using credit card as compared to debit card and cash, since it offers additional security and buyer protection.

But how?

When you make a transaction through a credit card, it does not immediately impact your account balance. It operates on an IOU. So in case of misuse, you can always cancel the IOU and protect yourself from theft and frauds.

And what about debit cards?

Any transaction made through a debit card, instantly affects the balance in your bank account. So in cases of a fraud or theft, you an end up paying heavily and you will have to fight your case to recover your money. Getting back your money seems harder than cancelling an IOU.

But debit cards have a PIN code, no?

Yes they do, but most of the stores use debit cards as credit cards and they don’t even ask for signature for cross checking purpose.

Where the use of credit cards has been exploited for wrong reasons by the previous generations, young adults of today have engineered their use in a much more effective way. Credit cards like every other commodity have their advantages and disadvantages, and it appears as if the forthcoming generations are better equipped for their use.

Loan ranger

Whenever people hear the word loan… it more often than not seems like a bad thing. Why is this. Well… maybe that’s because U.S. personal and state debt is at an all time high. With the recent turmoil the global economy is experiencing, loans are the black sheep of the family. It stands to reason that poorly used, loans can result in additional financial hardship. If left unpaid, they can result in default and at its worst… bankruptcy. Bankruptcy then places an individual in an area of financial limbo for several years–this can be crippling and should be avoided at all costs.

Of course, since the financial crisis in 2007/2008, the government has come down hard on loan companies in an attempt to curb personal borrowing and to lower the issuing of loans. We think this is a good thing as any move to responsible lending and borrowing can only serve to make for better industry practices, higher-quality service providers and protected consumers. Used responsibly, loans are a great way to leverage one’s earnings. Maximizing what you earn against a low-interest loan can be an excellent way to grow wealth.

The pitfalls to keep an eye out for are many. Car loans, for arguments sake, can be expensive on two fronts. Firstly, the interest rates are traditionally high, which means borrowers pay more for their car than the advertised sticker price. This can be difficult to see as the total borrowing amount might not necessarily be advertised at point of sale. Secondly, the car itself will devalue over time. This is a double whammy for borrowers as the interest charged on the car loan inflates the purchase prices, while the car loses value almost straight after it has been bought.

Other things to look out for–payday loans. This type of loan was introduced to provide a quick and convenient way for people to gain access to short-term loaned funds. This sounds like a great idea in principle… but if you ever consider such a loan, then always remember to read the fine print, as this is where they make their money. Interest rates can initially be quite low… however… should payments be missed… then the agreed interest rate soon sky rockets. Borrowers are then caught in an ugly trap. As if the initial interest rate wasn’t high enough… most are forced to default on payments, which results in court action. Following on from the court ruling in favor of the lender, bailiffs are authorized to take from the borrow anything from the borrower’s personal possessions that meets the value of the outstanding loan. The items that are retrieved are then sold. You can usually find items like these in pawn shops.