New TransUnion study explores Millennial and Generation X credit dynamics

As the first generation to be fully immersed in mass-market digitalization, Millennials are slowing their credit card usage while increasingly using other credit products such as personal loans. A just-released TransUnion (NYSE:TRU) study found that Millennials are carrying on average two fewer bankcards and private label cards than Generation X (“Gen X”) consumers at the same respective ages. Conversely, Millennials’ appetite for new auto and personal loans has grown at a faster rate than Gen X borrowers at the same age points.

“Younger consumers present substantial growth opportunities for lenders during their lifecycle, and it’s imperative to understand their credit preferences now to build strong, long-lasting relationships going forward,” said Ezra Becker, senior vice president and head of TransUnion’s global research and consulting group. “Millennials, in particular, offer new challenges to lenders, as they are the first group to truly begin their adult lives in the digital age. While Gen Z consumers are only just beginning their credit journey, many Millennials are now reaching a stage of life where they will be making larger, more significant purchases.”

TransUnion’s study compared the Millennial (born 1980-1994) and Gen X (born 1965-1979) generations because they represent more than half of the overall buying power in the United States (as measured by income distribution). “Younger borrowers offer lenders more growth opportunities in the future, as the largest volume of loan originations occur the decade after consumers turn 40 years of age – a time when many consumers are near their peak earnings,” said Becker.

Credit Cards Out of Fashion; Cars and Personal Loans in Style

The study found that, in addition to carrying fewer credit cards than Gen X consumers, Millennials also are maintaining lower balances on those cards. TransUnion analysts believe that this is partly driven by the CARD Act of 2009, which limited the marketing of credit cards on college campuses. The increased use of debit cards also plays a role in this shift. The study pointed to recent Federal Reserve data, which found that debit card transactions grew from 8 billion in 2000 to 60 billion in 2015. In contrast, credit card transactions only increased from 16 billion to 34 billion in that same timeframe.

“While many Millennials still use credit cards, it’s understandable to see fewer 20-somethings today possessing and using credit cards when we take into account the regulatory environment, the popularity of debit cards, the ease of online loan origination, and other salient factors,” added Becker.

TransUnion’s study evaluated credit origination trends over twelve months (2015 for Millennials and 2001 for Gen X) for both generations at the same ages between 21 and 34. The study found that Millennials are opening new auto loans and personal loans at a higher rate. Millennials opened new auto loans between the ages 21-34 at a 21% higher rate than Gen X borrowers. Millennials also opened far more personal loans than Gen X – nearly double the rate.

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