Personal Finance

What millennials don't know about credit cards

Credit card debt: What should you pay off first?
Credit card debt: What should you pay off first?

Millennials may be more savvy than other generations on social media, but they have a lot to learn when it comes to credit cards.

Nearly half of millennials, people ages 18 to 34, have recently applied for a credit card because of an advertisement or a promotion, according to a new survey from NerdWallet, which provides online credit-card comparison tools.

The problem with this, NerdWallet said, is that many millennials do not have the required financial qualifications to obtain the credit cards they apply for. That leads to them be denied for the cards and hurts their credit score. That may help explain why more than half of Generation Y has a reported FICO score below 670. The average U.S. consumer has a score of 695.

To avoid these hits to their credit, millennials should apply sparingly for credit cards and wait the appropriate amount of time between applications, said Sean McQuay, a credit cards associate at NerdWallet.

"A good rule of thumb is to wait six months to a year between card applications," McQuay said.

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A large portion of millennials go to the other extreme—NerdWallet found 31 percent shun credit cards altogether.

Not applying for a credit card can lead to a lower credit score as well as a shorter credit history, which can affect millennials when they apply for car loans or shop for insurance.

Millennials are also prone to push their credit cards to the limits, said Jill Gonzalez, a spokeswoman at CardHub, a credit-card comparison website.

"If you do max out your credit card, you're going to trigger the penalty APR, which is 27.99 percent on average," Gonzalez said. "That could definitely make future transactions more costly."

Additional penalties can burden millennials later in life. The average debt load for people between the ages of 21 and 25 is $13,116, a number that more than triples to $46,622 once they hit their late 20s, according to a recent study by iQuantifi, an online financial planner.

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Millennials, and borrowers from any generation, can lower credit-card fees by avoiding late payments. Most card issuers let borrowers set up email or text alerts for when payments are due.

If you make a late payment, it doesn't hurt to ask your credit card company to waive late fees. In fact, found, while only 28 percent of credit-card users sought to have a late fee waived, those who did had a success rate of 86 percent.

"It's not like if this is your fifth or sixth time asking for a waiver you'll get it," said Matt Schulz, senior industry analyst at "But if it's a one-time thing, you will most likely get it."