Generation Z and Credit Cards – The Future of Debt

A generational shift in attitudes towards debt could foreshadow some interesting changes in the credit card industry. Generation Z, the newest generation with purchasing power, is taking a wiser approach to determining what types of debt they are willing to take on.

Unlike Millennials who came of age during a tumultuous recession, Gen Z is taking steps to make less desperate decisions. Many Millennials were forced to take on credit card debt to stay afloat and often finance their degrees, putting them thousands of dollars into debt before they landed their first full-time job. In addition to credit card debt, Millennials took out record-breaking amounts of loans to complete their degrees in hopes of landing a better job. Those in Gen Z (those born between 1995 and 2015) are learning from these Millennial mistakes. Approximately 52% of Gen Z members state they do not plan on applying for, let alone use, credit cards. Generation Z is more reluctant to shell out hard cash for four-year degrees, choosing to stay local or choose a program that is shorter in duration. They also see value in the trades, which gets them out into the workforce much faster than traditional college experiences.

While Millennials have made their fair share of financial mistakes (and will continue to pay for those well into the future), their outlook on credit cards and carrying debt is mostly positive. Around 40% of Millennials believe they will succeed at paying their non-mortgage debts off within 25-30 years. On the other hand, Generation X (those born between 1961 and 1981) holds even more debt than Millennials with a much bleaker outlook. Members of Gen-X carry an estimated $30,334 in non-mortgage debt on average vs the Millennial average of $22,784. About 22% of Gen X-ers state they do not believe they will ever pay their debt off completely. Perhaps it is this attitude that sparked their children, Gen-Z, to take a more pragmatic approach to debt and savings. Unlike their struggling family members, older members of Gen-Z only carry an average of $6,900 of non-mortgage debt – nearly half of what the average Millennial carried at the same ages.

So what does this mean for retailers? It is time to create an online presence. Gen-Z spends an average of two additional hours per day than their Millennial counterparts using social media and researching purchases online. These same young adults are choosing alternative methods of payment, such as PayPal and Venmo, to make secure purchases online. Cash is not king for this demographic, but it doesn’t mean they don’t watch their bank accounts daily. Through the use of bank apps and automatic alerts, they stay on top of their balances and avoid fees whenever possible. Businesses can no longer operate as simple brick-and-mortar locations if they want to remain successful. These businesses should also consider accepting app-based payments such as Apple Pay, Google Pay, and Samsung Pay. Gen-Z is looking for convenience, security, and speed all in one which is what these apps have to offer.

Credit card popularity may dwindle, but the popularity of plastic over cash remains on the fast-track. Plastic will continue to replace cash in most businesses, and most consumers will continue to choose credit and debit cards over cash.

Do you think your spending habits reflect your generation? Why or why not? Sound off in the comments below!