Finance News
Posted by: Staff Writer | Jul 22,2007
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All the talk these days seems to be about the Baby Boom generation. You can't turn around without seeing an article about how the Baby Boom generation is potentially facing a Social Security crisis, as the Boomers are set to reach retirement age. The children of these boomers, called Generation Y, the Echo Boomers and other monikers, are close behind in their impact on world finance.
Credit cards are largely used for entertainment, travel and dining spending. People in their early 20s have been shown to lead in all categories. People in the age range of 18-28 are more likely to be active via dating, extended travel, going to the movies, buying consumer products and spending money overall.
The Risks and Rewards of Younger Credit Card HoldersFor advertisers, this age range is the Holy Grail. The reason that a show like "Friends" was so popular is because it reaches this target group. For credit card companies, this age range is the Holy Grail as well, as a greater number of people in this range will be applying for credit cards. They are expected to spend $2.15 trillion by 2015. As the world goes increasingly plastic, this money is destined to be spent on credit cards, a huge revenue source for the credit card industry.
This is both good and bad news. While the spending might be up among the Echo Generation, there is also an increased danger of defaulting on payments. The age range of 18-28 is composed of both avid spenders and folks who are a potential credit risk. Younger borrowers are more likely to default on loans, as they may be new credit card holders, they have a lower income, and their credit card payments may be combined with student loans, car payments, and other expenses.
Credit Card Payments Going Up?Potentially, this could affect the APR on new credit offers. You could see the APR go up on introductory cards in the future, as a way of protecting credit card companies against future defaults on credit card purchases. For the most part, credit card companies are courting this generation aggressively, as the Echo Generation is a virtual credit goldmine.
Coupled with the issue of credit card payments going up in 2005, younger borrowers are going to be looking at potentially hefty credit card bills in the near future. The answer to this is to establish a good credit score as soon as possible, thereby opening up the field to more credit card offers with a lower APR. |
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