As millennials struggle with credit cards, bankruptcy could help

On Behalf of | Jul 25, 2019 | Bankruptcy

There is perhaps nothing inherently wrong with having a credit card. Some Connecticut consumers use credit cards to improve their credit scores, or to make specific purchases in order to earn reward points. Paying off the balance every month is often important to maximizing these benefits. Unfortunately, it is easy to end up carrying increasingly larger balances from month to month. As millennials struggle with growing balances, some may find that bankruptcy can be an effective tool for handling overwhelming amounts of debt.

Between 2008 and 2012, Only 41% of millennials used credit cards, but now that figure has jumped to 52%. The increased popularity of credit cards among millennials is not particularly concerning, but how they are managing those accounts is. In the first quarter of 2019, 8% of this generation’s credit card balances were considered seriously delinquent, more than any other age group. A total of 60% of adults aged 18 to 34 either carry large balances, shell out for late fees or engage in costly behaviors with credit cards. The average credit card interest rate is approximately 17%, so carrying a balance and falling behind on payments will only add to a person’s debt load.

Part of the problem could be that millennials were never taught how to properly manage finances. Many were teenagers or new adults when otherwise reckless financial systems caused a recession, only to see those same systems bailed out. There was also a rush to encourage as much borrowing as possible after the recession was over. Loans with nearly zero-interest rates reward those who borrowed while the economic system seemed to almost punish those who saved money. These same adults were also encouraged to take on enormous student loans for college, with many institutions and even the government misrepresenting those loans as just another form of financial aid.

Sadly, some people in Connecticut end up in debt due to financial illiteracy. Individuals who think they are making financially sound decisions can often end up far in over their heads and find it impossible to get out. Although bankruptcy may have a negative connotation — particularly among younger adults — tackling the problem of debt earlier rather than later can help a person better prepare for his or her future.