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Does Millennials’ credit card wariness spell trouble for retail?

August 17, 2016Written by George Anderson

When J.C. Penney CEO Marvin Ellison recently pointed to the business positives that have come from the chain’s test of major appliances, one key point was the high percentage of new customers who were signing up for the retailer’s credit card to finance their purchases. The willingness of consumers to take on debt has proven to be a net positive for merchants over the years, but that may be in jeopardy as Millennials push back against the “charge it” mentality of their parents. An analysis of Federal Reserve data by The New York Times has found that credit card debt among those 35 years of age or younger has fallen to its lowest level since 1989. Younger consumers typically prefer to use debit cards or services such as PayPal that pull directly from bank accounts when they make purchases. A number of factors explain the wariness of Millennials to take on credit card debt. Many in the generation carry a heavy load of student loan debt that they are years away from paying off. Others have witnessed family and friends struggle to pay off credit card debt. Some Millennials are concerned about future finances as they move into their mid-thirties and contemplate their children’s education, as well as their own eventual retirement. A survey of 1,000 adults by the Society of Grownups, reported by Bloomberg, found that half of those between 21 and 29 are receiving financial support from relatives. Interestingly, 41 percent expect to help support their parents in their retirement years. Laws enacted after the financial collapse as well as unemployment and under-employment among Millennials has also cut off access to credit for many. Research conducted earlier in the year by the Pew Research Center found that 71 percent of males between 18 and 34 were employed compared to 84 percent in 1960.

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