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Gen Z is racking up credit card debt almost 3x faster than others

  • Gen Z is finding it harder to pay off their credit cards as inflation rises.
  • Compared to a year ago, young people’s credit card balances are up 30%, according to data from VantageScore.
  • Consumers with low credit ratings also saw their credit card balances increase by almost 25%.

Young people are starting to see the effects of inflation on their credit card bills.

Generation Z, or young people 25 and under, saw their credit card balances rise 30% in the second quarter, compared to a year ago, according to ratings firm VantageScore. The rest of the population saw an 11% increase in their credit card balance, according to the report. VantageScore data comes from a random sample of 12.5 million credit files in the United States.

People with a credit score below 660 also saw their credit card balances increase by almost 25%, more than double the percentage for the rest of the population. For millennials, the data revealed that their credit card balances had increased by 22% over the past year.

With inflation pushing up the prices of basics like gas and food, young and low-income consumers are finding it harder to pay their credit cards and other bills than they were in the beginning of the pandemic.

During the pandemic, consumers have had some cushion from stimulus checks, savings and a pause in student loan repayments that have helped them pay down more of their debt, said Silvio Tavares, CEO and president of VantageScore, to Insider.

VantageScore found that the percentage of credit card loans that are 30 days past due is still lower than it was before the pandemic, but is increasing, especially for Gen Z and Millennials.

Reuters reported that consumer credit rating agency TransUnion estimated that the percentage of delinquent credit cards could reach 8.4% in the first quarter of next year.

“That doesn’t mean the sky is falling on us,” Tavares said. “We just need to monitor the trend and see if it continues and spreads to other groups.”

Tavares told Reuters some Americans are paying off less credit card debt while spending more on travel and meals.

Consumer spending data indicates that, despite high inflation, people still spend more on travel and transportation than on other goods and services.

“There are signs that inflation has peaked and is coming down,” Tavares said.

Part of the reason Gen Z and Millennials saw an increase in credit card balances, Tavares said, is that their incomes weren’t growing as fast as inflation, so they needed a way to meet their needs.

“If inflation stabilizes, we won’t see balances increase as quickly,” he said. He also added that extending the pause on student loan repayments would help millennials and millennials save more money to pay off credit card debt.

Overall, Tavares said consumers are healthy and credit scores are trending up, even for Gen Z and millennials.