When Congress enacted the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 -- which made it illegal to issue a credit card to anyone under the age of 21 without a job or co-signer -- the assumption seemed to be that young adults are less capable of handling credit than their elders. But a recent study by researchers at the Federal Reserve Bank of Richmond and the University of Arizona suggests that assumption may need re-examining.
The study found that people under age 21 are actually better at managing their credit in some ways than older groups of borrowers. The study compared age groups using bank data from before and after the CARD Act and found that young adults under age 21 are substantially less likely to fall into a serious delinquency (such as 90 days past due or worse) than some older groups in the study. They are also the least likely of all age groups to default on a credit card .
Student credit card use data from Sallie Mae's 2012 How America Pays for College report also point to responsible credit card use among students: Forty-one percent of student card balances are less than $500 and another 33 percent of student credit cards have a zero balance.
Another important finding of the Federal Reserve study: Those who enter the credit card market earlier are less likely to default and more likely to have a mortgage earlier than those who enter the credit card market later, suggesting that early exposure to credit may actually be an asset for young borrowers.