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Millennials spurn credit for debit and mobile

* Bad economy leads Gen Y to shun credit
* Mobile systems may provide credit companies a new stream

Millennial with credit card
Ben Welsh | Getty Images

You can offer young Americans credit, but they might not take it.

Millennials are turning away from traditional credit cards in record numbers and relying on the safety of paying as they go, according to a new study from CreditCards.com. More than a third of Americans ages 18 to 29 have never had a credit card, according to the study, which was released Wednesday. ( Tweet This ). And the financial crisis and rocky economy might have turned them off completely to the practice.

"Folks who have come of age in a horrific economy and a terrible job market are understandably skittish," said Matt Schulz, a senior industry analyst with CreditCards.com. "That skittishness may have pushed them toward debit cards and prepaid debit."

Part of the credit avoidance is certainly due to the CARD Act of 2009, which put serious limits on credit card companies' abilities to market to younger consumers and to sign them up for credit. The federal regulations require applicants under age 21 to provide proof of income or a co-signer.

Still, the average age of first-time credit card owners seems to be getting lower. Respondents over 65 said that they got their first credit card at age 32 on average, seven years older than those who are now between 50 and 64 years old. Baby boomers came of age before the rapid expansion of credit 20 to 25 years ago, Schulz said.

The report also reveals differences in attitudes toward credit cards along economic and ethnic lines. Four percent of whites said that someone should never get a credit card while a negligible portion of Hispanics said the same.

Hispanic respondents were the most liberal with credit, with nearly a half saying that people should get credit cards between the ages of 18 and 20. Only a third of whites said the same, and only a quarter of blacks.

The question, Schulz said, is whether millennials will move to credit cards once their careers get going and the economy stabilizes, or if credit card companies will need to find new avenues to attract consumers.

"The credit card industry's ties with Apple Pay and going into mobile payments is something that could appeal to younger folks who always have their smartphones with them," he said.

In a silver lining for credit card companies, only 3 percent of survey respondents think someone should never get a credit card. It's higher in rural areas, where 9 percent of respondents said people should avoid credit cards.

The report is based on a survey that was conducted by Princeton Survey Research Associates International. PSRAI conducted telephone interviews with a nationally representative sample of 1,000 adults living in the continental United States. Interviews were conducted by landline (500) and cell phone (500, including 288 without a landline phone) in English and Spanish by Princeton Data Service from April 1 - 5, 2015. Statistical results were weighted to correct known demographic discrepancies. The margin of sampling error for the complete set of weighted data is plus or minus 3.6 percentage points.