Gen Z has more card debt than millennials — and higher credit scores

Dive Brief:

Credit cards are more common among Generation Z Americans than they were with the preceding generation of millennials, who came of age during the Great Recession, according to a study released last week by credit bureau TransUnion. About 41% of people age 18 to 24 in 2019 had them, compared with 34% in the same age range in 2012.
About 50% of Gen Z reported prime credit scores (661 and above), compared with 39% of millennials in 2012.
A greater percentage of millennials in 2012 reported having student loans (44%) than their Gen Z counterparts in 2019 (37%). That could be because higher unemployment rates led more millennials to continue their education before entering the workforce, TransUnion said.

Dive Insight:

Gen Z’s higher credit scores may make lenders more comfortable extending credit. However, underwriting standards in the auto and credit card industries have also become more favorable toward nonprime borrowers since 2012. About 23% of subprime Gen Z consumers have a credit card. That’s nearly double the 12% of millennials that had one or more at the same age. Additionally, 10% more credit-active Gen Z consumers have an auto loan, compared with millennials at the same age.

But with the higher penetration rate comes higher balances. The average 24-year-old last year owed about $2,000 on their card, about one-third more than millennials at that age in 2012, Bloomberg reported.

"Gen Z is the first generation of digital natives, and they have come to expect a seamless consumer experience across all walks of life — including how they access, use and manage credit," said Jason Laky, head of financial services at TransUnion. "Our belief is that the desire for credit among this generation is significant across the board, and improving economic conditions will likely serve as a springboard for more credit, especially in emerging credit markets."

The study explored credit activity among Generation Z in three established consumer credit markets (the U.S., Canada and Hong Kong) and three emerging markets (India, South Africa and Colombia). The U.S. has the lowest penetration rate for credit cards among the three established markets TransUnion studied. In Canada, for example, 99.8% of credit-active Gen Z’ers had a credit card.

The relatively low popularity of cards in emerging markets may simply be a product of culture. About 5% of credit-active Gen Z consumers have a credit card in South Africa, TransUnion found. Credit issued by clothing and apparel retailers is the most widely held product there at 66%. A two-wheeler loan is the most popular product for Gen Z consumers in India, with 21% market penetration, compared with 11% for credit cards.