COLUMBUS, Ohio (1/17/13)--Younger Americans not only take on more credit card debt than their elders, but they are also pay it off at a slower rate, reported a recent study from Ohio State University.
Younger generations may continue to add credit card debt into their 70s, and die still owing money on their cards, said the study. This is an opportunity for credit unions to educate Gen X and Y about money management and using credit cards wisely, according to the Credit Union National Association.
"When individuals rack up high amounts of debt at a young age, they get themselves into a vicious cycle that often is very hard to get out of," Michelle Dosher, managing editor in CUNA's business and consumer publishing area, told News Now.
"Credit unions can help young adult members by educating them about the consequences of poor money management and by giving them advice about the smart use of credit," Dosher added. "Teaching members strong money management skills at a young age will help them as they become mature adults. By providing this initial education, credit unions are instilling in members that the credit union is there to provide guidance throughout different stages of their lives."
Lucia Dunn, co-author of the study and professor of economics at OSU, noted, "If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future.Our projections are that the typical credit card holder among younger Americans who keeps a balance will die still in debt to credit card companies."
Persons born between 1980 and 1984 have credit card debt substantially higher than do the previous two generations, the study found. On average, they hold $5,689 more debt than their parents born during 1950-1954 at the same stage of life and $8,156 more than their grandparents born during 1920-1924. Children's payoff rate is 24 percentage points lower than their parents' and about 77 percentage points lower than their grandparents' rate.
The study also uncovered good news: Increasing the minimum monthly payment spurs borrowers to not only meet the minimum, but to pay off substantially more, possibly eliminating their debt years earlier.
Researchers combined data from 1997 to 2009 for consumers ages 18 to 85 years for a final sample size of 32,542.