New research from comparison site Finder suggests that more and more Aussies are getting credit cards ASAP. And they’re not using them wisely.
They found that 16.6% of people get their first credit card when they’re 18 – the legal minimum age you can sign up for a credit card in your own name. Another 6.3% wait until they’re 19. But by Age 25, most people have a credit card – 55%. Chances are, these numbers are at least partially reflective of your internal stats on new sales to younger people. But the reason behind those new applications might be as simple as you think.
What’s the problem?
Speaking to NewsCorp, a Finder spokesperson said that “As the cost of living goes up, a significant number of young Australians are turning to plastic to cover everyday expenses… some young borrowers may not have financial support from their family and credit may be their only option.”
In other words, it’s not just youngsters wanting to have cool stuff and pay for it later that’s the problem. Although that’s certainly a contributing factor. Rather, it’s the fact that things like rent, bills and groceries are more expensive than ever – and young peoples’ wages are growing especially slowly. The rate of unemployment and underemployment (not getting enough hours) is especially high amongst young people, according to ABS stats[i]. That’s not just because young people are more likely to be going to school, TAFE or uni: people who aren’t looking for a job are classified as ‘not in the labour force’, not unemployed.
It’s possible that some younger people are resorting to using their credit card to make ends meet on those weeks when their income isn’t high enough. The problem comes when they can’t pay the balance off at the end of the month, and interest starts to build up – or if their circumstances change and they can’t make payments at all.
Support your customers to make smarter decisions
The Finder spokesperson also pointed out that many young people aren’t aware of how their early credit card abuse or repayment troubles have affected them. At least not until they go to apply for a car loan, or even their first mortgage, and end up getting rejected. From a credit provider or credit broker’s point of view, this means that young credit card customers are not setting themselves up to be successful, sustainable consumers of credit products in the future.
The most efficient way to prevent this from happening with a whole cohort of potential customers is early intervention. That’s where Money101 comes in.
We’ve created a range of smart, simple and interactive online education units centred on millennials’ financial goals, milestones, and first-time decision making challenges. There’s a unit entitled ‘Managing your credit card’, and supporting units including handy practical lessons on budgeting and saving. These off-the-shelf modules are ready to go, so they’re quick to roll out to your customer base.
Looking for a bespoke solution with more bells and whistles, tailored to your brand guidelines? We’re up for the challenge. Have a look at some of the online learning experiences we’ve created for other institutions. And when you’re ready to discuss what we could do for your organisation, the Melbourne-based Money101 team is just a phone call (or email… or DM…) away.