A recent report showed that the way young adults use credit is changing. According to FICO, which created the FICO score that is often used to make loan decisions, fewer young Americans today are using credit cards. According to the FICO data, 16 percent of adults between the ages of 18 and 29 did not have credit cards as of 2012. This reflects a significant increase over 2005, when only nine percent in this age group were cardless.
In addition to saying no to credit cards, the data revealed that among those young adults who carry cards, the amount of purchases financed is decreasing. The data showed that the average credit card debt among young adults fell to $2,087 in 2012. This is about a $1,000 decrease from five years earlier.
Financial experts say that trend towards decreased credit card usage can be explained by the recent recession. Like generations who came of age during the Great Depression, the recession has encouraged the young people of today to be more frugal.
In addition, experts say that the trend reflects the fact that it is harder for young people to qualify for credit cards today than in the past. Since 2009 when Congress passed the Credit Card Accountability Responsibility and Disclosure Act, a minimum level of income or a co-signer is required for young people to qualify for a credit card.
Credit card debt and bankruptcy
As credit cards often have high interest rates that can make the smallest balance increase exponentially, it is encouraging to hear that more of the young are using credit cards responsibly. Although the data suggests that finances are looking rosier for young adults, this is not always the case. For example, other studies have pointed out that young adults are carrying almost double the average of student loans than they were in 2007.
For young adults who are overwhelmed by credit card or student loan debt, bankruptcy may offer relief. Both Chapter 7 and Chapter 13 can discharge most types of unsecured debt, such as credit card or medical debt. Free of this debt, the filer emerges from bankruptcy in a stronger financial position.
Unfortunately, due to bankruptcy reform passed in the last 15 years, bankruptcy cannot eliminate student loan debt, except in the direst of circumstances. However, bankruptcy can eliminate the obligation to pay most other types of debt, which can free up more funds to be applied towards student loan payments.
If you are struggling with debt, your situation can seem insurmountable. However, this is generally not the case. An experienced bankruptcy attorney can inform you of your bankruptcy and non-bankruptcy options that can free you from your difficult financial circumstances.