(NewsNation) — Members of Generation Z have more credit card debt at their age than any generation before them, according to a new Wall Street Journal report.
With inflation plaguing the economy, young adults have needed to turn to using credit cards to cover the rising costs of food and shelter. Now, some Gen Zers are barely making their monthly credit card payments.
“This is a generation that is feeling financial stress in a more acute way than millennials did a decade ago,” Charlie Wise, the head of global research at TransUnion, told the Wall Street Journal.
$2,834 in debt on average
According to new TransUnion data, the average credit card balance for 22- to 24-year-olds in 2023 sat at $2,834. That’s 25% more than millennials carried when they were that age in 2013.
Plus, theaverage interest rateon a given credit card is now roughly 21.5%, the highest it’s been since the Federal Reserve started tracking rates in 1994.
Credit card balances surged to $1.13 trillion in the fourth quarter of 2023, up $50 billion from the previous quarter as consumers continue to take on more debt to make ends meet.
Inflation woes
The New York Fed’s report found that more people are struggling to keep up. Roughly 6.4% of credit card debt was delinquent by 90 days or more, up from 5.8% the prior quarter. The latest uptick marks a 59% jump from the 4% rate at the end of 2022.
Nearly 10% of the outstanding credit card debt held by 18- to-29-year-olds is 90 days or more past due, New York Fed researchers found. That rate is roughly double what it was two years ago but still below the 14% level observed during the Great Recession.
The Federal Reserve has signaled that its first interest rate cut islikely months away, which means credit card rates may remain elevated for the time being.
In the meantime, consumers will be hoping inflationcontinues to easeas policymakers try to pull off asoft landingand avoid a recession.
NewsNation digital reporter Andrew Dorn contributed to this report.
Americans collectively owe over $1 trillion in credit card debt. But one generation carries the most, on average: Gen X. The average credit card balance for Gen Xers, defined at those between the ages of 43 and 58, rose to $9,123 in the third quarter of 2023, according to Experian's latest available data.
Average Credit Card Debt by Age: Gen Z (Ages 18-27)
Even so, the average credit card debt for Gen Zers was $2,854 in the third quarter of 2022, according to Experian. A year later it had risen 14.3% to $3,262.
The Federal Reserve notes that student loan balances have reached their highest levels in history. This high debt burden understandably makes millennials hesitant to seek out additional debt.
Americans collectively owe over $1 trillion in credit card debt, with members of Generation X, on average, owing the most and Gen Zers owing the least, CNBC.com Make It reported.
Gen X (ages 43 to 58) not only carries the most debt on average of all the generations, but is also the debt leader in credit card and total non-mortgage debt.
The rising debt load largely reflects a surge in prices for food and shelter at the start of their careers, coupled with a larger percentage of Gen Z who graduated with student loans.
The study found that 84% of credit-active Gen Z consumers had at least one credit card (bankcard) as of Q4 2023. This is significantly higher than the 61% of credit-active Millennials who had at least one card 10 years prior.
By 2030, Millennials (born between 1981 to 1996) are expected to have the most total debt at an average of $228,891 per person. Generation X (born between 1965 and 1980) holds the most student debt at an average of $45,796, while Gen Z (born between 1997 and 2012) has the lowest with $20,468.
And when it came to acquiring debt, 11% of millennials said they had never been in debt – the most of any generation. This compares to about 8% of Gen Xers and 5% of baby boomers who have never owed money. A key takeaway from these results is that younger respondents may not have had as much time to accrue debt.
It is easy to assume that a wealthy family has always been wealthy and will always be wealthy. But the truth is, around 70 percent of wealthy families lose their wealth by the second generation. More so, around 90 percent of families lose their wealth by the third generation.
Gen Zers face greater obstacles to financial success
Not only are their wages lower than their parents' earnings when they were in their 20s and 30s, but they are also carrying larger student loan balances.
How Gen Z and Millennials Differ With Money Habits. Even though both generations value saving money, Gen Z is far ahead of millennials in terms of how much they're putting away. According to Finder's Consumer Confidence Index, Gen Z saves an average of $857 per month, while millennials save $294.
Compared to Gen Z, millennials typically spend more money, which comes to no surprise, since they are older, more likely to be employed, and typically less reliant on their parents or guardians.
As of 2022, the generation with the lowest credit score is Gen Z (18-25). That said, the generation with the lowest credit score is almost always going to be the youngest generation of adults. That's because credit history is an important factor in credit scoring.
Millennials pay by credit card more frequently than other generations, with 36% reporting they use credit cards at least once a day. Just 30% of Gen Zers, 20% of Gen Xers and 9% of Baby Boomers reported the same.
Women are stereotypically seen as irresponsible spenders, but the data doesn't back this up. According to a 2019 Experian study, men carry more debt than women across nearly all categories, including credit card debt — the study found that men have $125 more in credit card debt than women on average.
By the numbers: Borrowers between 35 and 49 years old owe the most in federal student loans, according to Federal Student Aid data. Details: Women typically borrow more for college than men, according to NerdWallet, a personal finance company.
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