Image source: Sean MacEntee via Flickr.

Millennials may have fewer credit cards in their wallets than their parents, but they're using them just as actively, especially older millennials. According to credit researcher Experian, millennials' use of credit cards is 37%, which is essentially the same as generation X, and according to, older millennials use their credit cards more than Americans of any age. Those are worrisome findings because if millennials fail to understand the risks credit cards pose, then they could end up falling short of important financial goals later on.

Trouble ahead?

Millennials are the most tech-savvy generation, but they've got some catching up to do when it comes to their finances. 

According to Experian, 71% of millennials feel confident about their knowledge about finances, yet roughly a third of millennials have no idea what their credit score is and 67% don't understand how their credit score is calculated.

Those numbers suggest millennials might be shocked by the financial reality facing them. On average, millennials underestimate the amount of debt their peers are saddled with and overestimate their credit score. Experian found that the average millennial has $52,000 in debt and a credit score of 625 while millennials guessed their peers had $26,600 in debt and an average credit score of 654.

Student loans account for a lot of millennial debt, but credit cards account for more of it. That's a problem because interest rates on newly issued credit cards are at five-year highs. According to, the average low rate on a new card eclipsed 15% earlier this summer. Since the Federal Reserve is debating boosting rates that can be used to determine credit card interest rates, millennials may end up paying more in interest on their credit card debt than any other generation. 

Millennials' credit card habits may also be unintentionally putting them behind on their retirement savings. An annual survey by the Employee Benefits Research Institute finds that 75% of workers between age 25 and 34 have less than $25,000 saved for retirement, or less than half the amount that Fidelity Investments suggests people have socked away in their 30s.

Making changes

If you're a millennial who's falling behind on your retirement savings because of debt, there's no time like now to make changes to your spending and saving habits.

Thanks to compound interest -- or interest on interest year in and year out -- every extra dollar set aside now can make a big difference in the value of your retirement savings down the road. Investing money for retirement when you're younger also saves you from having to make tough budget decisions when you're older.

For example, a 25-year-old can accumulate $1 million by age 65 by contributing less than $500 per month to an account that earns a hypothetical average 7% return annually. However, if they wait until 40 to start saving, then they would need to contribute over $1,300 per month to reach that same million-dollar target by age 65. 

Since people of all ages tend to spend more money when they use credit cards instead of cash, it's critical to budget monthly spending for discretionary purchases, such as restaurants or trips, and to review credit card spending monthly to make sure you're sticking to those limits. It can also help to begin embracing cash over credit and to educate yourself more about money, debt, and credit scores. By understanding fully how credit can help and hurt you, you might be able to avoid a cash crunch when you get into your 40s and beyond.