Although Congress passed the CARD Act in 2009 to help prevent consumers under age 21 from digging themselves deep into credit card debt, a new study by researchers at Arizona State University and the Federal Reserve Bank of Richmond suggests that younger credit card users are not more likely to default. Consumers in this age group, rather, are working to build a credit history.
Default risk was found to be highest among credit card holders in their 50s. People under 21, however, may be less likely to default because the get help from their parents. Older consumers may be more likely to default because they have more fixed obligations. For a middle-aged couple with $15,000 in credit card debt, a combined $150,000 income could make that situation stable. If one spouse loses his or her job, or they spend savings on a child's college education, that may increase the need for credit card default. A 21-year-old with $1,800 in credit card debt and a $25,000 income, however, has more options in case of job loss -- such as moving back in with relatives, receiving their help to pay off debt, or finding another low-paying job. The issue of default, then, may not necessarily involve a consumer's level of financial responsibility but may have more to with how easy it is to cut expenses or expand income.