Millenials don't like credit cards, but do they need them?

It seems millennial don't like credit cards, which can affect their credit scores if they don't choose the right scoring agency. 

The majority of young adults aged between 18 and 26 prefer not to use credit cards - a significant 63 percent, according to a survey by Bankrate and Princeton Survey Research Associates International. For comparison, only 35 percent of adults older than 30 do not have a credit card. The survey found that external factors - such as a decline in credit card usage since the Great Recession and the Credit Card Accountability, Responsibility and Disclosure Act of 2009 - have contributed to the downward trend in credit card usage among millennial. But some, simply just don't want one. 

"I don't really feel like there's a need for one in the way I live my life," Melissa Pileiro, 24, told Bankrate. "The idea with a credit card is you're essentially putting money down that you don't have."

The issue with millennial' rejection of credit cards is the negative impact it could have on their credit scores. Credit card usage plays a significant role in credit scoring, and credit scores are becoming increasingly important. Bill Pratt explained to Bankrate that credit scores qualify consumers for insurance policies, cell phone plans and sometimes even job opportunities. While many millennial believe they are being financially responsible by avoiding credit cards, the detrimental effect on their credit scores may create problems in the future. 

For example, 26-year-old Allen Walton tried to borrow $5,000 in order to purchase a car two years ago. The only issue was his thin credit profile. 

"I couldn't get any loans," he told Bankrate when describing how he had to turn to an auto dealer for a loan. "They made me print out my entire banking history for the past 24 months."

Are credit cards the only way?
It seems that younger people have made clear their preference for debit cards, The Washington Post noted. Debit cards hold many of the same advantages that credit cards do over cash, with the additional benefit of helping millennials avoid falling into debt. The lessons learned from the Recession, as well as the prevalence of student debt, have many millenials extremely wary of accumulating any sort of debt whatsoever. 

However, as mentioned, a credit card is one of the easiest ways to build a strong credit score, and this is necessary for millenials who hope to soon day make large purchases such as a home. Avoiding one could make it more difficult to do things like take out a mortgage.

 "You need credit to get credit: There's a catch-22," Jeanine Skowronski, a credit card analyst for, said. And she is right, for the most part. There's an exception to the rule. 

Credit cards aren't the only way for young people to build there credit scores. They can also utilize credit scores that incorporate alternative data in order to display their financial responsibility. These scoring models use information such as utilities payments, phone bills and monthly rent in order to determine creditworthiness, according to PRBC. This means that even young people without a credit card, who have not yet had the chance to pay off a mortgage or anything of the sort, still have the opportunity to build credit. 

Traditional credit scores often exclude the kind of payments that people make most often, such as subscription bills or heating transactions, in favor of larger, more difficult financial activity such as mortgage or credit card debt pay-offs. Alternative scoring agencies such as PRBC provide millenials with the opportunity to build their credit scores without ever having to acquire a credit card. 

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