There’s a disconnect when it comes to millennials and credit. They’re the generation least likely to carry cash, but a new survey by TD Bank shows they are also the most likely to fall short when it comes to building healthy credit habits.
For example, millennials are big believers in plastic, but 23 percent don’t have a credit card. And while they tend not to like cash, 26 percent actually prefer to spend cash when they travel.
Other statistics stick out. Personal finance experts say consumers should use 30 percent or less of their credit limit. Half of millennials have tapped between 31 percent and 90 percent of their available credit.
Perhaps more disturbing, 32 percent of millennials routinely carry a credit card balance. They rarely pay off their balance in full, potentially damaging their credit health and increasing their monthly costs in a rising rate environment, as the one consumers found themselves in last year.
What’s my score?
About a quarter of millennials are unaware of their credit score, a real disadvantage when applying for everything from credit cards to car loans. Consumers with high credit scores deserve -- and should demand -- lower interest rates.
"The data is a bit concerning,” said Mike Kinane, who is head of US Bankcard at TD Bank. “It shows that a significant knowledge gap exists for millennials when it comes to credit, especially compared to prior generations."
Kinane says even millennials who use cash should develop their financial knowledge and habits since it will no doubt prove useful in the future.
Advice from Suze
Money management guru Suze Orman consistently counsels consumers to get rid of their credit card debt, even to the point of tapping into savings to do so. After all, she points out, you’re earning 1 percent on your savings but probably paying 17 percent or more on your credit card balance.
If you lack savings but have an excellent credit score, Orman also suggests a balance transfer card with at least a year of zero percent interest. ConsumerAffairs rates the best balance transfer cards here.
The TD Bank survey also suggests millennials aren’t quite as savvy as older generations when it comes to playing the credit card rewards game. They do a good job of earning rewards with their purchases, but 30 percent have put off using those rewards to the point where they have expired.
According to the survey, millennials spend $2,447 a year on dining, more than Gen-X ‘s $1,923 and Baby Boomers’ $1,486. Using a credit card with 2 percent cash back on dining could net nearly $50 in rewards each year. That could pay for over two weeks of coffee or almost four months of a Netflix subscription.