Generation Z individuals are facing higher levels of credit card debt compared to any previous generation, as highlighted in a recent report by The Wall Street Journal.
Due to the impact of inflation on the economy, young adults have resorted to using credit cards to manage the increasing costs of essential items like food and housing. Consequently, some Gen Z members are struggling to meet their monthly credit card obligations.
Charlie Wise, the head of global research at TransUnion, emphasized that this generation is experiencing more significant financial pressure than millennials did ten years ago. Recent data from TransUnion revealed that the average credit card debt for 22- to 24-year-olds in 2023 was $2,834, which is 25% higher than what millennials had at the same age in 2013.
Moreover, the average interest rate on credit cards has reached approximately 21.5%, the highest since the Federal Reserve began tracking rates in 1994.
As of the fourth quarter of 2023, credit card balances surged to $1.13 trillion, indicating a $50 billion increase from the previous quarter as individuals are taking on more debt to manage their expenses. The New York Fed’s report indicated a rise in delinquent credit card debt, with approximately 6.4% of debt being overdue by 90 days or more, up from 5.8% in the previous quarter, marking a 59% increase from the end of 2022.
Researchers at the New York Fed found that nearly 10% of the outstanding credit card debt held by 18- to 29-year-olds is 90 days or more past due, which is double the rate from two years ago but still lower than the 14% observed during the Great Recession.
The Federal Reserve has hinted at a potential interest rate cut in the coming months, which could impact credit card rates, potentially keeping them elevated.
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