Persistent inflation has made Gen Z’s transition to adulthood hard. Now, it’s landing them in debt at a critical point in their financial development.
According to new report from Credit Karma, members of Gen Z saw their average debt balloon to $16,283 in the final quarter of last year, up 3.1% compared to the three months through May. That’s the biggest increase out of any generation, although their overall average debt was lower than their older counterparts.
With decades-high inflation outpacing wage growth in most parts of the U.S., consumers are increasingly leaning on credit cards to make up the difference. But Gen Z workers on entry-level salaries are having more trouble than their older counterparts keeping up with the soaring cost of living. While the average credit card debt was the lowest for younger borrowers at $2,781, the growth outpaced all other generations at 5.9%. Gen Z drivers also saw the largest increase in auto loan debts at 2.3%.
Younger generations weren’t just taking on debt at a faster pace than older generations—they’re falling behind on payments too. Gen Z was the only generation to see an increase in past-due accounts, which includes any credit card, mortgage, student loan, medical loan, auto lease or auto loan accounts that are overdue by more than 30 days.
The ballooning debt balance could negatively impact their credit scores, which has long term implications for everything from access to apartments to mortgages. For Gen Z consumers, who already have the lowest average credit score at 653, any negative report on their credit history will have a bigger impact.
This article was provided by Bloomberg News.