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Gen Y turning away from credit as financial crisis hits harder
Monday June 15, 2009
Generation Y, or people aged in their late teens and twenties, are beginning chose their savings accounts over credit cards according to a recent survey completed by the Commonwealth Bank. The survey suggested that there was a shift in spending patterns by Generation Y with many reserving credit cards for emergency use only.
This trend is said to be a result of the global financial crisis finally impacted on those who may have acquired significant debt over recent years, with the typical Generation Y'er having debt for overseas holidays, loans for cars and similar purchases. The survey concluded that many Generation Yers are now using their savings accounts as their first point of finances as opposed to credit cards or loans.
Experts say that this behavior shift reflects an adaptation to the current economic climate, which is viewed by some as even more difficult for Generation Yer's as they are also typically looking for employment, their first residence out of home and managing their finances in what is a difficult financial time.
On a greater scale, the Australian Securities and Investment Commission has recently released a statement detailing how minimum monthly repayments on credit cards has become increasing difficult with many people who pay the minimum never getting ahead and out of debt.
The Commission explained that people who only make minimum monthly repayments may find themselves in even greater financial difficulties as the typically minimum monthly credit card repayment will only cover interest accrued on the credit cards themselves.
An example used was a debt of $10,000 would then take 27 years to repay if the minimum monthly repayments were made, resulting in an interest bill of $11,000.
Credit cards experts and industry professionals generally recommend that people limit their number of credit cards and try to make monthly repayments higher than that of the minimum in order to save more money in the long term.
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