Timothy Danikowski was ready to start his adult life. After four years in a small college town and a fifth year back home thanks to the pandemic, he finally moved to Seattle in 2021. Soon after, Danikowski got a respectable job in accounting, moved into his own apartment and signed up for his first job. credit card, which he intended to use only for emergencies.


At first, Danikowski controlled his balance well enough, but soon his compulsive shopping addiction disappeared desire to see the world broke his discipline. “I’ve been collecting points to travel,” he told me. “But when I travel, I want to go shopping, and then the expenses get out of hand.”


In three years, Danikowski has racked up about $15,000 in debt on three cards, one of which has a 28% interest rate. He makes his minimum payments every month — a task that has become much more difficult since he lost his job this year — and tries to resist the urge to keep using the cards, but his balance isn’t budging.



“When it comes to everyday things, I choose comfort over everything else,” he said.


Danikowski and many others Gen Zers are racking up credit card debt at a rapid rate. A TransUnion study found that, adjusted for inflation, the average credit card balance for someone who was 22 to 24 at the end of last year was $2,834, a 26% increase over the average figure for millennials who were the same age a decade ago. . The research also suggested that Gen Zers were much more comfortable with credit cards than previous generations: they opened more cards, fell behind on payments more often, and used the cards for more types of purchases. Alev told me that Credit Karma data shows that Gen Zers are acquiring debts faster than any other age group. The combination of an increasingly turbulent economy and Gen Zers’ desire to do so make up for lost time Pandemic “revenge spending” has left many members of the generation overly reliant on credit.


“Gen Z is really prioritizing fun over finances when it comes to things like dining out, shopping and traveling,” says Courtney Alev, consumer advocate at Credit Karma. “That, combined with the fact that they just had fewer earning years, explains why their credit card debt is growing faster.”


While the overall debt burden of Gen Zers is still lower than that of older generations, young consumers’ premature reliance on credit cards is putting their financial future at risk. “The financial burdens that Generation Z faces today can have long-lasting impacts on their lives,” says Alev, “including their ability to reach important milestones such as postponing big moments like a wedding, buying a house or starting a family until they feel financially more secure.”




Part of Gen Zers’ interest in credit cards is simply the march of technological advancement. Digital natives have more payment options than any generation before, and they have embraced electronic payments and alternative credit methods such as digital wallets And buy now pay later apps. In the meantime, credit card companies have done just that targeted youth as enthusiastic new customers.



There are also some acute financial reasons why Gen Zers have jumped head first into the credit pool. Pandemic restrictions, inflation and high interest rates hit them hard as they embarked on their professional careers and sought their financial foundation. As young people sought solutions to financial problems, and credit card balances dropped, credit card companies were more than willing to make an offer to Gen Zers. The companies have made getting credit easier in 2021 and 2022 by giving people with lower credit scores access to cards they previously didn’t qualify for. Young people opened credit cards faster than any other age group during the pandemic.


The temptation to use those cards was great. Credit Karma found that the average credit card debt of Gen Z members increased 3.2% between the first quarter and the second quarter of 2024, while the average debt for millennials, Gen 1.6% has increased. %. While credit card balances in the U.S. dropped early in the pandemic, it didn’t take long for American consumers to start racking up debt again. Credit card balances have increased by $396 billion since the first quarter of 2021, an increase of 51%.





I couldn’t afford to live, but I’m in a new city and I want to get out and meet people. I called that my fun expenses. I started putting all that on my credit card.




Some people have built up credit card debt a wave of post-pandemic revenge spending; some were chasing points and rewards. Still others said they racked up big bills because they couldn’t afford not to. Regardless of the reasons, it’s clear that many Gen Zers are comfortable with their small pieces of plastic.


For example, Danikowski told me that he fell into the credit card trap after purchasing an American Express gold travel card with a sky-high annual percentage rate. The map allowed him to collect points, allowing him to travel further. “I got so used to this lifestyle over the past three years that it became difficult for me to cut back,” he says.



Others, like Nico, a 27-year-old advertising strategist, found themselves caught in a post-pandemic spending cycle. After graduating from college in 2020, Nico moved back home with his mother to save money while working remotely. At the end of 2021, Nico was ready for a change. After moving to Chicago, he started using his credit card a lot more. That was him struggling to make his $1,100 rent on a salary of $36,000. In addition to paying his bills and making sure he had groceriesNico tried to make new friends in town.


“I couldn’t afford to live, but I’m in a new city and I want to go out and meet people. I called that my fun spending,” he says. “I started putting all that on my credit card.”


Nico kept reaching his credit limit, and the credit card company kept renewing it. Three years later, he has about $20,000 in credit card debt and a monthly minimum payment of $400, almost all of which goes to interest. Finding a better-paying job has helped him get a handle on the debt, he said. He no longer uses the card and tries to make a $700 to $900 payment each month, hoping to lower his total.


Credit proved essential for Emmaline, a 27-year-old web developer in North Carolina, when she needed to make ends meet during a career transition. She racked up $6,000 in credit card debt while attending a full-time coding bootcamp, using the card to pay for groceries, car maintenance and insurance, and other life expenses. Although the card was a lifeline as she tried to build a successful career, she felt ashamed and worried about her debts, she tells me. She kept it a secret for a long time. This year she finally opened up to family members, who helped her make a plan to pay it off and offered some financial assistance. After a few months of throwing almost every cent she had at the debt, Emmaline was able to pay it all off in November.



“I made sure I only ate beans and had money left over for gas,” she says. “I shed a tear or two of pure joy and relief when it was finally paid off.”




Gen Zers are far from the only ones racking up credit card debt: U.S. consumers’ total credit card balances will exceed $1 trillion by 2023. have difficulty paying off their loans also increases. But the particular danger for Gen Zers is that they become so dependent on credit cards so early in their financial lives. Higher debt, Alev says, can lead to lower credit scores that could save it more difficult to pay for things like a house or a car. From March 2022 to February 2024, the percentage of Credit Karma’s Gen Z members with subprime credit, meaning a score below 600, increased by 8 points, from 25% to 33%, while the percentage of millennials with subprime credit scores increased by 6 points increased. . Credit Karma said the average Gen Z credit score fell from 671 in the first quarter to 659 in the second quarter.





Credit card debt is an invisible problem. You can’t see it. It veils you in shame. It eats you like a parasite.




William, a 27-year-old emergency medical technician in Colorado, has approximately $20,000 in credit card debt, accumulated over four and a half years. At his first job out of college in 2020, he earned a salary of $27,000. William struggled to make ends meet and mainly used his credit card to do so necessities such as groceriesbills and car maintenance. But when a health emergency kept him out of work for weeks, his balance snowballed. Today, William makes his minimum payment, but almost everything goes to interest. He says he once dreamed of moving abroad and teaching English, but has accepted that his credit card debt is keeping him tied to a reliable source of income in the United States.


“I would like to have a family one day and be able to settle down and raise children and give them a good life,” says William. “But I can only do that once I have more control over this.”



It’s not clear that Gen Zers’ habits will change anytime soon. The Federal Reserve Bank of New York said in August that younger debtors are more likely to be delinquent on their credit card payments than older ones. Falling behind on these payments has left young people with a bleak outlook.


“Credit card debt is an invisible problem,” says Emmaline. ‘You can’t see it. It covers you with shame. It eats you like a parasite.’


Alev says there are some steps people can take to escape credit debt. First and foremost, she warns people to stay as far away from high-interest debt as possible. She also advises creditors to stop using that line of credit and make a plan to pay off the debt, such as transferring the debt to a personal loan at a lower interest rate.


Most importantly, she says, members of the credit card generation shouldn’t bury their heads in the sand. She recommends people create a spreadsheet with all their debts, along with minimum payments, interest rates and consolidation options.



When William feels suffocated by his monthly payments and interest rates, he may be tempted to rack up even more debt. “There’s always someone willing to give you another credit card,” he says.


Danikowski, meanwhile, said feeling hopeless about his debt was pointless. Although he lost his job this year, he still made trips to Europe and New York.


“I know it’s not a good decision,” he says. “But at least I got to see the world.”




Erin Snodgrass is a senior reporter at Business Insider.



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