If you have been following the financial news this year, you know that the United States has experienced an economic downturn due to the COVID-19 pandemic. Unemployment is up and many Americans are out of work or underemployed.
That said, the news isn’t all bad when it comes to credit cards, although there are some things you should know before you apply. A recent article on the CNBC website revealed some interesting trends for both the country as a whole and for Millennials in particular. Here’s what you need to know.
The first notable statistic you should know is that 19% of Millennials in a recent Bankrate survey say they were turned down for a credit card in 2020 due to their credit scores. That number is lower than the total number who received rejections for all forms of financing, including mortgages, bank loans, car loans and other financial products. That number is 32%.
While the news might seem bleak, the truth is that Millennials are doing better this year than they have in the past. That’s because many have curtailed their spending and paid down credit card debt since the start of the COVID-19 pandemic.
Overall, Millennials are better off than the rest of the country. Approximately 21% of all Americans were turned down when they applied for a credit card.
It may come as no surprise that CNBC revealed that low income Americans – defined as those with annual income of less than $40,000 – were more likely to be turned down for credit cards than those with high income. In fact, fully a third of all rejections came from that demographic.
At the other end, only 14% of people making $80,000 or more per year were turned down for a credit card. With unemployment up and some employers cutting employees’ pay, it isn’t surprising that many Americans are struggling to get credit cards.
While the news might seem to be bleak, the truth is that the financial picture for the average Millennial is rosier in 2020 than it was in 2019. Here are some key facts:
As we mentioned already, part of the reason that the overall financial picture for Millennials has improved this year is because many have reduced their spending during the pandemic, especially for entertainment and social events. Some have used their government stimulus payments to pay off or pay down their credit card debt.
For every generation, the question looms large: is this a good time to apply for a new credit card? As you might expect given the state of the economy and the world, the answer isn’t as simple as we might like it to be.
The first thing you need to know is that lenders have tightened their standards for credit card approval. Nearly one third of all uS lenders say they have changed or restricted their standards since August of 2020. That’s the largest and most significant change since the economic downturn of 2009.
Just a year ago, the average credit score required for approval was 710. As of this writing, the average is 735. If your credit score is lower than that, you may struggle to get the credit card you want.
The standards for balance transfers are even tougher and many consumers are finding it difficult to qualify for a low-interest balance transfer card in the current climate.
Let’s get back to the question of whether you should apply for a credit card. The answer is – and we know this is frustrating – maybe.
Some people are getting approved. If your credit score is 735 or higher and your credit utilization is low, then you may be able to get the card you want without difficulty.
If you aren’t sure where you stand, here are some pointers to help you determine whether it makes sense to apply now:
If you opt for a secured card, remember that having it represents an opportunity to build (or rebuild) your credit history.
While 2020 has had its share of economic challenges, careful planning and budgeting will ensure that you can get the credit you need, when you need it.