In 2009, Congress passed the CARD Act, aimed at preventing kids under 21 from getting themselves credit cards and then getting themselves into big trouble. It’s an intuitively plausible case. After all, we all know someone who did just that -- I went to college with a kid who developed a severe compulsive gambling problem, which was followed by some severe hours working at his family business after his parents cut up his credit cards and made him work off the debt. Almost everyone I’ve ever talked to about consumer credit has a story like this. So it seemed reasonable to think that keeping college kids away from credit until their brains had matured a little more might prevent some huge disasters.

According to a new study performed by Andra Ghent of Arizona State University and Peter Debbaut and Marianna Kudlyak of the Federal Reserve Bank of Richmond, that’s not the case. Folks who got credit young weren't more likely to default; most of them seemed to be building a credit history.

Young borrowers are the least experienced financially and, conventionally, thought to be most prone to financial mistakes. We study the relationship between age and financial problems related to credit cards. Our results challenge the notion that young borrowers are bad borrowers. We show that young borrowers are among the least likely to experience a serious credit card default. We then exploit the 2009 CARD Act to identify which individuals self-select into obtaining a credit card early in life. We find that individuals who choose early credit card use default less and are more likely to get a mortgage while young.

Default risk is highest among credit card holders in their 50s, not their 20s:

Source: Federal Reserve Bank of Richmond
Source: Federal Reserve Bank of Richmond

Reading that graph above, you might think this means that today’s young people are more responsible than previous generations. (It shows that the risk of default -- the top "severe" delinquency line -- People under 21 may be less likely to default because their parents bail them out, which still might feel disastrous to the parents who end up on the hook for thousands in debt. And it seems possible that the reason folks in their 30s, 40s and 50s are most likely to default is that they’re the most likely to have built up fixed obligations that demand a pretty high income.

Say you’re a middle-aged couple with a $150,000 income and $15,000 in credit card debt. Now, I’m not defending this choice -- you shouldn’t have $15,000 in credit card debt at any age! But as long as your financial situation is stable, that’s manageable. You can meet your minimum payments, and keep the mortgage and the car loans going.

But if one spouse loses their job, and can’t find another for a year, all that debt is going to crush the couple's savings. Maybe their kid is headed to college -- more money out the door. Credit card default is going to look pretty necessary, pretty quickly.

On the other hand, if you’re a 21-year-old with a $25,000 income and $1,800 in credit card debt, you have options if you lose a job. You can move back in with relatives, and maybe even tap them for help paying off your debt. It’s easier to find another low-paying job than it is to find a six-figure salary in marketing. And your debt, while large relative to your income, is still small enough that a determined young single person can find a way to knock it out. Six months or a year of delivering pizzas or pulling a few shifts at Starbucks will take care of it.

So this may not be as much an issue of who’s responsible, as how easy it is to cut your expenses or expand your income. Of course, in some sense that is an issue of responsibility -- which is why my personal finance writing urges people to pay down debt, including the mortgage, even if you could get a higher return in the market, and even if it means losing your sacred mortgage interest tax deduction. Debt is risk. And risk is something that none of us needs more of, financially speaking.

But that graph doesn’t tell us that there’s a systematic generational difference in responsibility. There may be, to be sure: the folks who lived through the Great Depression seem to have been systematically better savers than the generations that came before and after, and the new graduates who are suffering through our awful job market may also find that the experience turns them to permanent thrift.

But they also may not. The Great Depression was a much more extreme event than our modern problems, as bad as they are. When today’s 22-year-olds turn 45, their default profile may look more like today’s 45-year-olds than their younger selves.