Young People Actually More Responsible with Credit Cards, According to ASU Research

You know what's worse than a 19-year-old with a credit card? A 40-year-old with a credit card.

Despite the common belief that young people are the absolute worst when it comes to credit card use, a study from the W. P. Carey School of Business at Arizona State University and the Federal Reserve Bank of Richmond shows that people between the ages of 18 and 25 are among the least likely credit card users to have a "serious default."

The researchers were looking at the results of the Credit Card Act of 2009, which made it illegal to issue credit cards to people under age 21 unless they had a cosigner or presented additional financial information.

Using credit information, the researchers found that it wasn't the young people who had a poor track record with credit cards.

According to the W.P. Carey school, people in their early 20s are more likely to be 30 or 60 days past due but are among the least likely to be 90 days or more past due.

Andra Ghent, assistant professor in the W. P. Carey School of Business, says:

"Young credit card users actually default less than middle-age borrowers. Also, those who choose to get credit cards early in life are more likely to learn from any minor defaults and move on, avoiding major credit card problems in the future. Plus, they're more likely to be able to get a mortgage and become a homeowner at a young age."

Someone between the ages of 40 and 44 is 12 percentage points more likely to have a serious default than a 19-year-old, according to the study.

The report also says that the results "indicate that the individuals who enter the credit card market earlier in life are better credit risks, i.e., less likely to experience a serious delinquency associated with a credit card, than individuals who choose to enter later in life," and people who started getting credit cards while young also ended up with a home mortgage while they were young, too.

There are other factors surrounding the belief that young people are just plain bad with credit cards -- which presumably led to that Credit Card Act -- but the youngsters might not be as bad with credit as people think.

The study can be found here.

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Follow Matthew Hendley on Twitter at @MatthewHendley.

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Matthew Hendley
Contact: Matthew Hendley