Members of Generation Z are increasingly relying on credit
card debt to make ends meet.
The Wall
Street Journal reports that the average credit card balance of 22-to-24-year-olds
in the United States is $2,834 based on data from TransUnion, a credit dent
reporting agency. Debt levels are almost
30 percent higher than in 2013 after adjusting for inflation.
The result is an increase in financial stress among Gen Zs.
Younger people with higher debt are more delinquent on
credit-card payments and need to rely on family for help if they lose their
job, say economists and financial advisers. They also often delay life
milestones, including homeownership and marriage, say the economists.
“This is a generation that is feeling financial stress in a
more acute way than millennials did a decade ago,” said Charlie Wise, head of
global research at TransUnion.
Some of the factors driving the rise in credit card debt.
1. Rising rents. Young
people tend to be renters. Apartment
rents are on a tear. From March 2020 to
March 2024, apartments rents are up by 22 percent according to data from
the BLS.
2. Salaries are stagnant.
According to the Federal Reserve Bank of New York, the median salary of
a new college graduate in 2024 was $60,000, little changed form the inflation adjusted
median of $58,858 in 2020.
3. Interest rates are much higher today than just two years
ago. High rates on credit card debt make
it more difficult to chip away on principal balances.
4. Doom spending to relieve stress.
The result is a generation of young people that increasingly
fret about money. A recent study by the
accounting firm Ernst
and Young found that 52 percent of young Americans are concerned about not
having enough money.
