Gen Z Accumulating Credit Debt Faster Than Other Generations
According to a recent report from Credit Karma, the younger generation known as Gen Z, is accumulating credit card debt at a faster rate than any other generation. This trend is occurring in the midst of high inflation, and as Gen Z gains more purchasing power, their interest in luxury goods is growing.
Based on data gathered on January 6th from 78.2 million Credit Karma users, Gen Z had an average credit card debt of $2,781 in the last quarter of 2022, which increased by 6% compared to the three months through May 2022. Additionally, Gen Z saw a 3% increase in average total debt, accumulating $16,283 in dues in the last quarter of 2022.
Although their credit card debt was the lowest among all five generations analyzed, Gen Z was the only generation that saw an increase in past-due accounts, which include credit card, mortgage, student loans, medical loans, auto lease, or auto loan accounts that are overdue by more than 30 days.
In comparison, Millennials had an average credit card debt of $5,898 in the last quarter of 2022, which increased by around 5% from March to May 2022. Gen X owed $8,266 worth in credit card debt, which was just under a 4 percentage point increase over the same period.
As more Gen Z members gain spending power, the luxury market is looking to tap into this group’s spending potential, especially since more Americans between the ages of 18 and 29 are choosing to live at home with their parents. This trend is freeing up disposable income for spending on luxury goods.
The increase in credit card debt among Gen Z is happening amid persistently high inflation in the US, which has been rising since the COVID-19 pandemic due to factors such as supply chain disruptions, the Ukraine war, and increased demand following lockdowns. The Federal Reserve has been hiking rates to combat inflation, but the US consumer price index was still 6% higher in February than a year ago, which is far above the Fed’s target rate of 2%. On Wednesday, the Fed delivered its ninth straight rate hike since March 2021.
Read the Credit Karma report
Read article on growing demand for luxury goods
