Younger generations are facing mounting financial pressures as concerns over the economy deepen, worsened by escalating credit card debt and declining credit scores, according to recent data from the Intuit Credit Karma platform.
In November 2023, a portion of both Gen Z and millennials expressed apprehension about the economic climate, with 56 percent of Gen Z and 69 percent of millennials citing concerns over inflation, rising interest rates, and high levels of debt.
Now, with the US Federal Reserve signaling a reluctance to cut rates further in the near future, the financial stability of many young individuals hangs in the balance, the data conducted using anonymised data revealed.
Credit card debt rises among Gen Z, Millennials
Data from Intuit Credit Karma reveals a worrying trend in credit card debt among Gen Z and millennials, with both groups experiencing substantial increases since the Fed began raising interest rates in March 2022.
The average credit card balance for Gen Z surged by 62 percent, from $2,000 to $3,300, while millennials saw a 50 percent increase, jumping from $4,500 to $6,700.
The rise in credit card debt is particularly concerning given the current record-high interest rates, which further burden consumers, especially those with subprime credit scores below 600.
The proportion of millennials with subprime credit increased by 6 percent, surpassing a third of the demographic, while the percentage of Gen Z with subprime credit rose to 33 percent in February 2024, up from 25 percent in March 2022.
“The cost of living remains elevated, making it difficult for consumers to make ends meet and it’s starting to take a toll on their finances,” Courtney Alev, consumer financial advocate at Intuit Credit Karma said.
Gen Z, Millennial credit card balances rise as credit scores dip
She explained that there is detrimental effect of high-interest rates on borrowing costs, particularly as younger generations rely increasingly on credit cards for daily expenses.
Moreover, the decline in credit scores among Gen Z and millennials underscores the severity of the situation, with average credit scores decreasing by 5 points for Gen Z and 8 points for millennials overall.
The most significant drops were observed among millennials with credit scores between 660 and 719, whose scores plummeted by 26 points, and Gen Z individuals with credit scores above 720, experiencing a 24-point decrease.
“As more young folks slip into lower credit score bands, it could become even more difficult for them to get access to affordable credit. If you’re someone who has racked up a credit card balance, it’s not too late to make a plan for that debt. Start by ensuring that you are making regular, on-time payments toward your balance every single month – even if it’s the minimum payment amount. This will help you avoid negative marks for missed payments. Take a look at your monthly cash flow to see how much you can contribute each month beyond the minimum – increasing your payments each month will help you start slowly chipping away at your debt. If monthly is too overwhelming, consider making smaller weekly or biweekly payments,” Alev said.
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