New research reveals that 40% of those in ‘Generation Z’ pay off their credit card balances in full each month, rubbishing beliefs that credit cards are only used by those who undertake irresponsible lending.
So what else did the research reveal? And what other myths are associated with credit card usage? Let’s take a look.
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What does the data reveal about credit cards?
A new survey of 2,000 people by MoneySuperMarket, reveals that over half (59%) of Generation Z respondents (those born between 1997 and 2012) own a credit card. Of this group, 40% say they pay off their credit card balances in full each month. Roughly a third (28%) of the same group say they use one to build up their credit score.
Meanwhile, almost a quarter (24%) of respondents say they own a credit card to help manage their spending. Almost the same percentage (26%) say they use their credit cards as a way of bagging rewards.
The research also reveals that Gen-Zers are clued up about the protections offered by credit cards. That’s because more than a fifth (22%) of respondents say they use credit cards to ensure they’re covered if anything goes wrong.
Of those using credit cards to borrow, 25% say they pay off as much as they can each month. However, 16% admit they pay back only the minimum. While this may seem like risky behaviour, it’s worth knowing that paying back the minimum on a credit card can pay dividends, as long as you borrow on a specialist 0% purchase credit card and clear your balance before the interest-free period ends.
The survey also reveals that 21% of respondents who are worried about debt blame the 2008 global financial crisis. These worries may be well founded. That’s because many believe the global economy has never fully recovered from the financial crisis. Some claim the crisis is the reason why the UK economy is experiencing low-interest rates, high house prices and stagnating wages.
What myths are there around credit cards?
According to Jo Thornhill, MoneySuperMarket’s money expert, two common myths surrounding credit card usage among Gen-Zers include believing credit cards are only for those who are wealthy and that they’re only viable for those who have a set amount of money.
Commenting on the price-comparison website’s survey results, Thornhill is keen to rubbish these myths. She explains, “When used sensibly, credit cards can provide a flexible alternative to other methods of payment, while building a credit rating at the same time. It’s reassuring that so many 18 to 24-year-olds have credit cards for the principal purpose of building their credit scores.
“However, what we’ve also found is that for many Gen-Zs a lot of myths and misunderstandings abound about credit cards. It’s not uncommon, for example, to hear people say that credit cards are only for rich people, and that you need a certain amount of money to open an account.”
Despite the fact that these myths are common, it is worth bearing in mind that credit cards aren’t for everyone. That’s because if used incorrectly or irresponsibly, they have the potential to trap you in debt for years.
As a rule of thumb, you should only consider a credit card if you can afford the repayments. Try to avoid using a credit card as an excuse to overspend. Always make sure you clear your full balance before the end of any interest-free period. [middle_pitch]
How can you find the best credit card for you?
Before getting a credit card, search for the type of credit card that’s best suited to your needs. For example, if you’re looking to borrow cheaply, then a 0% purchase credit card may be for you. Right now, there’s a card that allows you to borrow for up to 23 months at 0%.
Alternatively, if you’re looking for a credit card to boost your credit score, then a specialist credit card for bad credit may do the job.
If you’re looking for plastic to take with you overseas to avoid hefty fees, then a travel credit card may be for you.
Finally, if you’re looking to get paid for your normal spending, then a cashback credit card will reward you every time you use it.
Will applying for a credit card impact my credit score?
Every credit card application you make is recorded on your credit file. If you get rejected for a card, then it’s best not to make lots of other applications. That’s because it may give lenders the impression you’re desperate for credit. Instead, it’s better to space out applications.
To protect your credit score, use our credit card eligibility checker to see your chances of acceptance before applying.