Gen Z Consumers Are Using Credit More, and Differently, than Their Millennial Counterparts at the Beginning of their Credit Journeys

  • Lending
  • 08.05.2024 03:55 pm

Gen Z consumers are tapping into credit at higher levels than their Millennial counterparts did in the early stages of adulthood (ages 22-24). TransUnion released these findings today at the company’s 2024 Financial Services Summit, attended by nearly 300 global financial services executives.

The new TransUnion study, Solving for Z, explored credit usage by today’s Gen Z consumers and compared it to similarly aged Millennials one decade ago. The study found that both Gen Z and Millennial borrowers faced early challenges in their credit journeys. 75% of surveyed Gen Z consumers said they had their finances negatively impacted by the pandemic-induced recession, while 60% of Millennials said the Global Financial Crisis had negatively impacted them. However, today’s Gen Z consumers have also faced an additional challenge – a rapid rise in inflation.

“Gen Z consumers have seen their finances significantly impacted by the pandemic and its aftermath, even more so than the challenges faced by Millennials as a result of the Global Financial Crisis,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “This likely has played a key role in the shifting priorities of Gen Z consumers, both in the types of credit they are seeking, and the way they are using that credit once they gain access to it.”

The study, which included analysis of recent credit data for Gen Z consumers as well as credit data from 10 years ago for Millennials, found that Gen Z borrowers are opening more credit lines and have both higher debt levels and delinquency rates compared to Millennials at the same age. Yet, Gen Z borrowers also are performing similarly to younger generations of the past in comparison to older generations (i.e. younger generations typically have higher delinquency rates as a group than older ones). The study found that 84% of credit-active Gen Z consumers had at least one credit card (bank card) as of Q4 2023. This is significantly higher than the 61% of credit-active Millennials who had at least one card 10 years prior. This comes as nearly 36% of Gen Z consumers ranked credit cards as the most useful credit product, up from 29% of Millennials a decade ago.

Gen Z Consumers Are Using Bankcards and Auto Loans More than Their Millennial Counterparts Did At the Same Age 10 Years Prior

Product Penetration Among Credit-Active Consumers

 Millennial 22-24-Year-Olds
in Q4 2013
Gen Z 22-24-Year-Olds
in Q4 2023
Credit Card (General-Purpose Bankcard)61%84%
Credit Card
(Private Label)
Student Loan49%34%
Personal Loan5%5%

Source: TransUnion Consumer Credit Database

Increased card usage comes amidst elevated inflation

The increase in card usage among Gen Z consumers is not necessarily unique to this demographic, as consumers as a whole have been using credit cards more to manage the significant and enduring growth in inflation over the past decade, particularly in recent years. Since Q4 2013, the consumer price index has cumulatively risen 32%, driving many consumers to use their credit cards as a financial backstop to help with increasing costs. A recent TransUnion report found that due to this increased usage, the total credit card balance held by U.S. consumers tipped past $1 trillion for the first time in 2023. In addition to rising credit card balances, higher prices have contributed to higher balances among Gen Z consumers across other credit products, including auto loans, up 14% in 2023 as compared to the inflation-adjusted 2013 average balances.

“It’s no surprise that in this economic climate, one in which the cost of living is significantly higher relative to a decade ago, younger consumers are increasingly turning to credit products to bridge their financial needs,” said Jason Laky, executive vice president and head of financial services at TransUnion. “This is a demographic that is younger and newer to the workforce and accordingly, is likely commanding a lower salary at an earlier point in their career. As long as inflation remains elevated and the cost of goods remains so as well, balances across products such as credit cards, personal loans, and auto are likely to continue to grow.”

Increasing Balances Reflect Higher Inflationary Pressures on Gen Z (22-24 Year Olds)

 2013 Average Balances
Per Consumer
2013 Balances
Adjusted for
2023 Average
Balances Per
Credit Card$1,708$2,248$2,834
Unsecured Personal Loans$3,785$4,981$5,273

Source: TransUnion Consumer Credit Database, Bureau of Labor Statistics (BLS)

The financial pressures brought on by inflation likely are a driving factor in the performance of today’s Gen Z consumers as compared to the Millennial group a decade prior. In the 24 months following origination of a new account, Gen Z saw higher consumer-level delinquency rates for auto and credit cards, and in particular for personal loans, with nearly 10% more Gen Z borrowers 60 or more days past due compared to Millennials 10 years earlier. At the same time, Gen Z consumers are not unique in experiencing greater financial challenges today. For all borrowers in 2023, consumer-level delinquency rates were higher than seen in 2013 across numerous credit products, including bankcards and auto loans. However, the rise seen among younger 22–24-year-old consumers, who are early in their credit journeys, warrants ongoing monitoring.

“The performance of the youngest Gen Z borrowers is down across a number of credit products as compared to Millennials of the same age 10 years earlier,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion. “While inflation and interest rates remain elevated, Gen Z consumers need to be particularly cautious in how they use and manage their available credit, given the relative youth of their credit profiles and lack of a robust historical track record. Establishing a foundation of strong credit performance will be important as this emerging segment looks to expand their credit wallets to meet their future needs.”

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