Using credit isn't the same as being in debt

Why Millennials Should Use Credit

by Rhona McKeran

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A 2015 survey by Bankrate, 63 percent of adults aged 18 to 29 refuse to use credit. This could be explained by front-row seats to the economic recession which have instilled in Generation Y a fear of economic instability, causing them to distance themselves from traditional financial trends. Further to this, millennials are finding themselves tackling colossal amounts of debt in the form of student loan repayments. With debt being a strongly-associated stigma of credit cards, it seems Generation Y is reluctant to take the risk of adding any more to their financial plate.

As a result of this, millennials tend to choose debit over credit as debit cards effectively operate as cash, providing them with the security of using the money that is actually sitting in their bank accounts.

In terms of economic recovery, it can be argued that millennials are in fact being financially savvy in their bid to stay out of debt by avoiding credit cards. However, with millennials on the brink of adult life, their decision to renounce credit could actually be at the expense of both their long-term and short-term goals. The following reasons ascertain why we should be choosing credit instead of debit next time we swipe.

A good credit score helps to obtain financial assistance

Whether it be a house, a car, or setting up your own business, huge expenses like these will require financial backing in the way of a mortgage or a loan which, in turn, require applicants to have a formidable credit rating. By spending only small amounts and continuing to clear the balance on time each month, using a credit card responsibly is one of the easiest and most reliable ways to build such a rating.

Further to this, 15% of your credit rating will be based on the length of your credit history. Therefore, if securing finance on a house, business or car is a long-term goal, then it is imperative that millennials start using credit now.

A credit card can act as a low-cost loan

The nature of using a credit card allows to you to purchase something at a time you don't have enough cash for it and then pay for it at the end of the month when your credit card bill is due. This is essentially the same as taking out a loan but with a much lower interest rate. Further to this, some credit cards offer initial interest-free periods after applying which enables you to save in the long term.

Credit cards are the most secure way to spend by offering you buyer protection

When your debit card is used fraudulently, the money is missing from your account instantly. However, when using credit, you are legally protected, reducing the risk of major loss from card fraud as your bank must refund any fraudulent payments immediately.

A good credit score enhances your chances of renting a flat or finding a job

These days, prospective employers and landlords are looking for more ways to determine whether or not they're about to hire the right employee or rent their property to a trustworthy tenant. According to a 2012 survey by the Society for Human Resource Management, 47% of employers are checking applicants' credit history as an indicator of their employability and it seems landlords are following suit by checking credit reports to gauge what level of risk you present them as a future tenant.

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You can gain rewards through credit cards

Some cards can be extremely beneficial in the way of earning extra perks. Make sure you look into applying for a credit card that will offer rewards that lie within your interests, whether this is air miles for the travellers among us or cashback schemes.

A credit card can help in an emergency

A credit card can also act as a buffer in the case of an emergency, providing you with instant access to funds. Whether you are travelling abroad or going about your day-to-day life, a credit card is valuable addition to carry at all times as it can provide an immediate solution to paying off any unexpected expenses until you are able to transfer the money from your bank account.

Reviewed April 2017

Rhona McKeran is a UK-based blogger and recent graduate with a keen interest in money-saving. Having recently started her first job, Rhona is getting to grips with the financial responsibilities of adulthood and documenting them in her blog posts on Spend It Like Beckham.

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