Gen Z racking up historic levels of credit card debt
While baby boomers and even millennials were warned about the dangers of credit card debt, a new generation appears to be forging its own path. Generation Z (people born between 1997 and 2012) is taking on increasing levels of credit card debt at an unprecedented rate. In fact, a study from the financial services firm Experian found that 43% of Gen Z consumers are now racking up debt on credit cards, a figure significantly higher than previous generations during their early 20s.
The staggering numbers may come as a surprise considering Gen Z grew up amidst warnings about the perils of credit card debt during the Great Recession of the late 2000s. Perhaps, therefore, it is not unreasonable to assume that they were taking heed of these warning messages and opting for less-debt laden financial experiences.
However, a range of factors, including cultural influences, shifting spending patterns, and, most worryingly, increased financial distress may be driving Gen Z toward credit cards. There has been an undeniable upward shift in Gen Z consumption and spending patterns, specifically online shopping. According to Deloitte, one out of three Gen Zers (aged 23 or younger) say social media influences their purchasing choices.
Moreover, financial issues among Gen Z may well be a more pressing factor, with one-third indicating financial stress at some time, according to a Morning Consult survey. With lower unemployment rates than their younger peers, these factors – heightened spending patterns and pressure, combined with increased online influence – seem to make an already-debt-loaded climate even more hazardous. As a result, consumers can expect financial literacy as a whole to continue emphasizing personal responsibility.
For investors seeking to take advantage of trends in financial services – namely, Generation Z being forced to contend with accumulating credit card debt – certain shifts in strategy could indicate fruitful opportunities for the investors, such as exploring microfinancing institutions and budgetary apps aimed at offering accessible financial products and improved literacy.