More Millennials Applying For Secured Credit Cards
There’s been a lot of talk lately about young people and money. Whether people are claiming that the Millennial generation is entitled and doesn’t want to work hard, or they’re saying that Millennials aren’t being getting paid enough to achieve basic goals like buying a home and paying off student debt, there is no end of opinions about how the 18-35 demographic is faring financially.
One thing that does seem to be happening is that young folks are embracing secured credit cards at a great rate, making these types of cards more popular than they’ve been in previous years. Secured credit cards are cards that almost anyone can get, whether they have good credit or not. That makes them a good choice for young people who haven’t established a credit history yet.
Scared of credit?
The thing that seems to be happening is that Millennials are afraid they’ll use a credit card to go into debt, and then they’ll have trouble paying it off. This fear isn’t unfounded; there is evidence that young folks do tend to have more trouble managing credit. Tim Van Tassell, a vice president at FICO, said the risk of getting into trouble with credit is highest among people ages 24-53. He said these young people are “still developing their financial literacy skills and learning to manage their loans and lifestyle costs.” Van Tassell said that this offers “a great opportunity” for financial institutions to offer Millennials some help managing their debt.
Secured cards offer an answer
Since applicants for secured cards put down a deposit that is usually equal to the amount of credit extended to them, there’s less chance of folks getting over their heads with debt. If they default on the loan, the money they put down as a deposit will be taken to cover the amount due. In essence, that money acts as collateral, guaranteeing the credit card issuer will get its money back.
The nice thing about secured cards is that they do help borrowers establish credit and achieve a good credit score – as long as they use the cards wisely and make payments on time. There are many different secured cards available to help young folks, or anyone with less than perfect credit or who is jittery about using an unsecured credit card.