Most Millennials are constantly warned by their boomer parents to be responsible and avoid credit card debt with the same commitment they apply to Game of Thrones spoilers.
Young people have been ingrained with a fear of debt, and while that’s healthy, it often also amounts to an uneasiness when it comes to credit.
That hesitation is problematic for a host of reasons.
As many Millennials grapple with the concept of ‘adulting’, there is something considerably ironic about the fact that many of them are taking their parents advice and avoiding practising one of the most adult tasks there is – managing debt.
A January study published by Yahoo7 found only 39 per cent of 18-24 year olds have a credit card, proving most Australians don’t consider signing up for one until they reach their late twenties.
The truth is, getting your first credit card as soon as you possibly can is one of the smartest financial decisions a young person can make. When approached with tact and caution, the benefits of having your own credit card far outweigh the cons.
You can boost your credit history
The transition into adulthood is made smoother when you have a good credit history already in place.
Establishing credit matters. Without a strong credit history, young people are likely to find it difficult to get a loan or mortgage when they decide it’s time to start making ‘adult’ purchases like cars, houses, holidays and even weddings.
In fact, many credit providers will penalise you if you can’t show some history of being able to manage and pay off credit.
Owning a credit card isn’t about having the ability to have a free for all spend-up and buy a pair of Yeezy’s in every colour – it’s about responsibility and planning for the future.
Owning a card will improve your financial literacy
Young people aren’t taught about personal finance in school or university. Instead, they are taught really useful things like algebra and photosynthesis. With the exception of the advice they receive from their families, most of their financial habits are born from tackling money-related problems as they arise.
Getting a credit card is a smart way to increase your financial literacy. For instance, keeping a significant amount of money in a high-interest earning savings account while using credit to pay the bill off in full is great training to do the same with an offset account and a mortgage in the future.
Credit cards are often safer than debit cards
From a practical standpoint, credit cards can also be a more secure option for Millennials when it comes to safety.
Two of the things most Millennials spend their money on – travel and nights out.
Unfortunately, card theft is at its most likely in these situations.
While pay-wave debit cards are essentially a form of cold hard cash linked to your bank account, credit cards offer more flexibility. If someone steals your debit card at a bar or youth hostel, your bank will only give you a portion of the stolen money back. However, if they steal your credit card, you can appeal the charges and be credited for the entire amount of the stolen charges.
Credit cards can be a more secure option for travellers too, especially if unexpected costs arise as your funds are dwindling toward the end of your trip. Many credit cards also have some form of travel insurance, but it is worth checking the small print to see what’s included.
While these tips will help your financial future, don’t forget credit card debt can be a slippery slope. Manage your credit card responsibly and pay it off in full each month. If you find yourself on an endless spending spree and sliding into debt, cut up the card and take out a lower interest personal loan to pay it off in full.