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More young Americans are without credit cards, have less debt

Glance around at all the young people around and you're not likely to see them without a cellphone or a smartphone. You also likely won't seem them without some form of plastic payment card. But what may surprise a lot of Arkansas readers of this blog is that more and more of that plastic doesn't represent credit cards. Debit cards, perhaps. But not credit cards.

Numbers gleaned from millions of consumers by credit score provider FICO indicate that the number of young Americans ages 18 to 29 who declare they are credit card-free has increased from 8 percent in 2007 to 16 percent as of the end of 2012. Overall credit card debt had dropped from an average of $3,073 to $2,087.

The reasons posited by FICO for this movement are multiple. For one thing, there's the reality of the recent recession. That proved an object lesson for almost everyone. But FICO says young people have also learned from how their parents took it on the chin economically. Bolstered by those realities, many have stepped back from credit and are opting for debit cards instead.

The reduction in credit card debt isn't the only category that has shown a decrease among the younger segment of consumers. Overall debt is off for them, even while student loan debt continues to press upward.

Take everything into account and the 18- to 29-year-olds are generally better positioned in terms of credit scores than older folks. The number with an excellent score of 760 or better went from under 9 percent in 2005 to over 11 percent in 2012. Comparatively, over-40 consumers in every age range have seen their overall debt loads increase and their credit scores slide.

Some of this may be due to cost shifting as parents take on more debt to help the next generation gain financial stability. Meanwhile, the older generations are teetering and many find themselves in need of constructive debt relief.

Source: Money.CNN.com, "Young Americans are ditching credit cards," Blake Ellis, June 14, 2013

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