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Average Credit Card Debt on the Rise for Gen Z, Millennials, and Gen X
As the cost of living continues to climb, consumers across all age groups are increasingly relying on credit cards. However, those in their prime spending years are experiencing the most significant impact on their balances, according to Experian data.
What’s Changed and What Hasn’t
While the average credit card balances have surged for millennials and Generation X, the increase is more modest for Generation Z. Credit card debt remains the most prevalent type of debt in the U.S., with 45% of households carrying a balance from month to month, as per Federal Reserve data. Major life events like weddings and home renovations, which often result in lasting debt, are typically financed by those in their prime earning and spending years.
Experian data indicates that spending during these prime years is becoming more noticeable, as interest rates and other factors contribute to higher balances for some age groups.
Average Credit Card Debt Trends
Despite a temporary decline in spending during the pandemic, Generation X’s average credit card balance has surged by nearly 50% since 2012, now exceeding $9,000. Over the same period, millennials’ average credit card debt has more than doubled to just over $6,600. Generation Z, still early in their financial journeys, shows a more modest increase.
Comparing the debt trajectories of millennials and Gen X with older generations reveals that baby boomers, who had the highest average credit card debt in 2012, now owe slightly less. Those born before 1946 also have significantly less average credit card debt than they did in 2012.
Spending Patterns by Generation
Older consumers generally spend less than younger ones, regardless of their credit. According to the Department of Commerce, personal expenditures peak between ages 45 to 54—prime Gen X years—and then decline with age. Generation X, which surpassed baby boomers in 2015 as the generation with the highest average credit card debt, shows no signs of reducing their balances. Millennials’ credit card balances are also rising sharply, soon to surpass those of baby boomers.
Meanwhile, older Americans’ average balances have plateaued or decreased, even amid rising interest rates and inflation.
Economic Factors Driving Debt
Rather than moralizing about spending habits, it’s essential to understand that economic factors largely drive the increase in credit card balances. In 2012, many consumers were still recovering from the Great Recession and the housing market collapse. The average FICO® Score was below 700 due to increased delinquencies, and lenders were cautious about underwriting new loans. High unemployment rates also made it difficult for many to keep up with payments.
By mid-decade, the economy had stabilized, and lower unemployment rates allowed consumers to borrow again, provided their credit was in good standing. As a result, average credit scores have steadily climbed, even amid the economic disruptions caused by the pandemic and ongoing inflation.
Generation Z is likely the most credit-aware generation, with over 80% of consumers knowing their credit score, according to an Experian survey.
Contact O1ne Mortgage for Your Mortgage Needs
At O1ne Mortgage, we understand the complexities of managing debt and are here to help you navigate your mortgage needs. Call us at 213-732-3074 for expert advice and personalized mortgage solutions. Let us assist you in achieving your financial goals with confidence.
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