Credit Card Debt For Gen Z Consumers Increasing Almost Three Times As Fast As Other Generations

Aug 5, 2022Financial Literacy, News

Recent data released by credit score company VantageScore found that consumers aged 25 and under (Generation Z) saw their credit card balances increase by 30 percent in the second quarter this year, while the rest of the population saw an 11 percent increase. The data comes from a random sample of 12.5 million credit files in the U.S.

“This doesn’t mean the sky is falling,” said Silvio Tavares, VantageScore CEO and president, according to Business Insider. “We just need to monitor the trend and see if it continues and spreads to other groups.”

Americans with credit scores below 660 saw their credit card balances increase by nearly 25 percent during the quarter, and millennials’ credit card balances rose by 22 percent in the last year. VantageScore also found that the percentage of credit card loans 30 days past due, though below pre-pandemic levels, is rising, especially for millennials and Gen Z.

As inflation drives up prices of common necessities like food and gas, younger and low-income consumers are facing more difficulty paying credit card debt than they were in the beginning of the pandemic. Consumers no longer have the cushion from stimulus checks or the halt on student loan repayments to help them pay down debt.

Tavares said that Gen Z and millennials saw a rise in credit card balances because their income increases were not reflecting rising inflation, using credit cards to supplement their needs. “If inflation levels off, we won’t see balances rising as quickly,” he said.

TransUnion recently estimated that credit card delinquencies could reach 8.4 percent in the first quarter of next year, as Americans are spending more on dining and travel and paying off less credit card debt. “There are some signs that inflation has peaked and is coming down,” Tavares said.

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