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Young Credit Card Users Rack Up Debt, Pay Off Slow

NEW YORK ( TheStreet) -- There's an old saying that youth is wasted on the young.

That may not be the case when it comes to young consumers and credit cards, as younger card holders are wasting no time accumulating debt, and are taking their sweet time paying that debt off.

A study from Ohio State University shows that some young Americans are piling up so much debt it may take them until their 70s to finally pay it all off -- if then.

"If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future," explains Lucia Dunn, co-author of the study and a professor of economics at the university.

Just how bad is it for young credit card holders? Pretty bad, Dunn says.

"Our projections are that the typical credit card holder among younger Americans who keeps a balance will die still in debt to credit card companies," she says.

In OSU comparisons, a U.S. credit card holder born between 1980 and 1984 has, on average, $5,689 more in credit card debt than their parents accumulated at the same time in life -- and $8,156 higher than their grandparents at the same period in their lives.

The study, which tracked credit card payments from more than 32,000 consumers from 18 to 85, finds credit card debt increases in youth, peaks in middle age and tapers off at older ages and that the amount of debt varies by how Americans approach debt in different periods of their lives. Consumers in their 20s and early 30s make the worst mistakes.

It's also young card owners who take the longest to pay down their debt, the OSU study notes. The data show that younger Americans payoff rate is 24% lower than their parents, and 77% lower than their grandparents.

The current financial culture contributes to the problem.

"Credit is more readily available now, and there have been changes in interest rates and less stigma attached to having credit card debt, which may all make younger people today more willing to go into debt," Dunn says.

OSU researchers call on young consumers to recognize the risks they're taking by accumulating so much credit card debt, and Dunn and her staff encourage young credit card customers to pay more than the minimum monthly payment. When they do so, they tend to stick with it, the study says.

"Raising the minimum payoff rate can have a powerful effect on how people actually pay off their credit card debt, much more so than you might expect," Dunn says. "They may see the increase in their minimum payment and start feeling uncertain about their future ability to pay off their debt. That may encourage them to pay off even more than they have to, in order to bring their debt level down."

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