Credit cards are one of the primary modes of payment used by consumers to purchase goods and services on credit. Credit card usage growth has been parallel with the growth of other types of consumer credit options, such as bank overdrafts, hire purchase and personal loans. However, even though credit cards offer flexibility to consumers, it has its own limitations. The current developments of global financial services have increased the availability and usage of credit, which, in turn, has directly increased the indebtedness of consumers.
Credit Card usage among millennials
The global millennial generation can be defined as consisting of those individuals who are born between 1980 and 2000. Because they have been brought up with digital technologies in an era that has experienced increased consumerism and globalization, they have different attitudes and expectations compared to their previous generations. There are certain stereotypes involving millennials being credit averse and thus avoiding credit card usage. However, the reality is completely different.
How Credit Card Usage Affects Millennial
Credit cards make it easier for millennials to justify overspending. While it’s true that millennials are slightly more credit-averse than their previous generations, their spending habits conclude that the vast majority prefer convenience over saving money. The following ways highlight how credit cards have affected the purchasing habits of millennials.
Impulsive buying occurs when a millennial experiences a persistent and sudden urge to instantly purchase an item. This can result from a temporary failure of self-control. It usually occurs when there is no pre-shopping intention to purchase a specific product or fulfill a specific buying task. The possibility of unplanned and unwanted outcomes is high when millennials act on impulse. When this impulse gets out of control, impulsive millennials tend to misuse their credit cards because they provide a readily accessible instrument to fulfill their self-generated desire for purchasing the items.
Missing payments for credit cards
Like any type of borrowing, such as borrowing for a home or applying for auto loans, credit card usage can also make a lot of sense when millennials can pay their balances each month. While it’s true that credit cards can be a good way to make payments and access advantageous rewards, letting credit cards carry balances is tantamount to financial suicide. It’s pretty hard for a millennial to maintain repayments once they fall behind on their credit payments. Ultimately it adversely affects their credit score, leading to higher rates on any form of borrowing at a later life.
Millennials and their addiction to credit card usage
Various studies have shown that millennials can get too caught up with the benefits credit cards offer. There are various signs that millennials have increasingly started to succumb to credit card addiction, which affects their lives in numerous ways.
Considering desperate options to pay your bills
Millennials can get caught up with credit card addiction so much that they start considering desperate options to repay their credit. They can often choose dangerous and expensive options to secure some more cash from other sources. In such cases, many millennials have turned to non-profit credit counselors to handle their overspending. They are professionals who can help sort out their finances, providing them with options to deal with their debt in a legal way.
Piling up credit card debt
The habit of credit card swiping on impulse and the emergence of various e-commerce and online shopping platforms can be addictive and disrupt a millennial’s financial calculations. While credit cards can be a great tool, millennials can sometimes use their credit cards for frivolous purchases. They need to change this habit to get back into a creditworthy position.
Buy now, pay later mentality
A common mentality among millennials is “buy now pay later,” however, this comes at a cost. The combination of never-ending payments and high-interest rates can have a negative impact on a millennials fund. Additionally, some advertising campaigns that promote EMI payments and other enticing repayment schemes can contribute towards this mentality. Millennials who get too absorbed in this can easily find themselves in financial ruin.
Overcoming Credit Card Addiction
There are various ways one can overcome credit card addiction. They may choose to adopt either short-term strategies or long-term strategies depending on their situation and capabilities.
For those who found themselves indebted dues to the credit card addiction and decided to quickly put an end to the destructive habit, the following measures are a must:
Creating shopping lists every time one goes out shopping can help the individual be more aware every time they have the urge to make frivolous purchases.
Creating a record of one’s spending, no matter how small they are, can help in such situations.
Cutting up or destroying one’s credit card may be seen as a desperate approach, but can work well for some individuals as they render their accounts inaccessible. In other words, no access to credit means – no overspending.
Since all habits appear for a reason, often a quick one-time solution serves a person as a distraction from the real problem. Thus, here are the real issues and long-term solutions to credit card dependence.
Setting up an emergency fund. Having the security of an emergency fund guarantees peace of mind. This should be funds allocated towards unexpected expenses, without the need for using one’s credit card. Setting up an emergency fund should be a part of one’s financial planning.
Seeking the help of a therapist. In many cases, addictive behavior, which includes overspending, often has deep-rooted origins. An expert therapist, in this case, can help get to the bottom of the issue.
Seeking a professional financial counselor’s help. A professional financial counselor can help one get their financial life back in order. They can formulate and customize strategies that can help any individual get back on track and develop healthy financial habits.
Individuals need to make one thing clear in their minds – credit cards are merely a means to access credit and not free money. For all the benefits that credit cards give individuals, their experience gets marred when there is excessive and irresponsible spending, causing credit card debt. Luckily there is a wealth of information available online, as well as experienced professionals who deal with individuals and their unique financial situations.