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Pros, cons of avoiding credit cards

Millennials are far more likely than older adults to make do without credit cards.

More than 60 percent of millennials — defined as those age 18 to 29 — said they did not have a single major credit card, according to Bankrate.com. In contrast, 35 percent of adults over 30 said they had no cards.

The disparity may be partly because the Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the CARD Act. The law made it tougher for those under 21 to qualify for credit cards. The proportion of students holding credit cards dropped to about a third of students last year, down from about half in 2004.

Other factors are at play as well. Younger adults burdened with student loans may want to avoid adding even more debt. And some millennials may simply lack the ability to qualify for one if they've had difficulty getting a job and don't have a steady income, or they may have tarnished credit because they previously got in over their heads with card debt.

Yet, there also can be a downside to avoiding credit cards entirely. "It's not necessarily a good thing," said Bankrate's Jean Chatzky. Young adults with little or no credit history have what's known as a "thin" credit file, which can make it difficult to obtain a loan on their own for larger purchases.

Rod Griffin, of credit reporting bureau Experian, suggests that a prudent step is to apply for a single card and use it periodically for small purchases. Making card payments on time helps create a positive credit report that make borrowing in larger amounts easier .

Here are some questions about establishing credit:

Should I request a card with a low credit limit to help prevent overspending?

Asking for a very low credit limit may backfire, said Griffin. An important factor in your credit score is the proportion of available credit that you use. If you have a low limit, it's easier to reach it, which tends to lower your score.

Can my student loans appear on my credit report?

Yes, so making payments on time is critical, according to Griffin, because payment history is the most important factor in your credit score. While education debt can cause financial problems if it's excessive, it can also help build a credit history, if properly managed.

What if I'm under 21 and want a credit card?

The CARD Act generally requires people under 21 to show they can pay their bills independently, or have someone who can co-sign the application. Chatzky said that as an alternative, parents might be able to add a child to their own credit card account as an "authorized user." The parent pays the monthly bill, to be sure it's paid on time, and the child benefits from a positive payment history.

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