Generation Z is rather cautious about using credit facilities offered by financial institutions and banks. The fear of spending money they do not have drives their hesitancy.
Trendy schemes like Buy Now Pay Later do not appeal to them much, because they rather only buy something if they know they can afford it.
That debt-wary attitude is one of several factors behind Generation Z’s much-hyped relationship with credit cards, but industry analysts say this generation is gravitating toward them as they mature.
They are not afraid of or uninterested in credit cards – they are just mindful of how they use them.
This group of young consumers is expected to turn to credit products more quickly than their millennial predecessors, who were delayed by the Great Recession.
One influence on Gen Z’s current relationship with credit cards is the Credit Card Accountability Responsibility and Disclosure Act of 2009, which introduced more hurdles for those under 21 trying to get a credit card, like a cosigner or income proof requirements.
Generation Z is defined as those born between 1997 and 2012, according to Pew Research Center, making older Gen Zers 18 to 25 years old.
Rossman said 55% of Gen Zers have credit cards, compared to 66% of millennials, 77% of Gen X, and 85% of baby boomers, indicating a “steady stair-step up.”
What sets Generation Z apart
Whereas many Gen Xers and some millennials got their first credit card in college, this milestone is occurring later for many Gen Zers, but so are other major life events, like buying a house, getting married, or having children.
One reason for those delays is student loan debt, which weighs heavily on this generation. Student loan debt kind of informs the majority of Generation Z’s financial decision-making.
A lot of Generation Zers in particular view credit cards as debt instruments. Analysts see Generation Z using credit cards “really responsibly. It is a lot more nuanced than Gen Z liking or disliking credit cards.
Generation Z is highly intuitive with technology, is values-oriented and prizes diversity, and uses peer-to-peer payment apps like Venmo or Cash App heavily.
Coming around to credit
Generation Z has no shortage of payment options, but those able to get credit cards appear to be turning to them in bigger numbers.
Credit card originations in the third quarter of 2021 were up 63.5% year-over-year, reaching a record 20.1 million new accounts. Generation Zers accounted for 3.1 million card originations in that quarter.
Generation Z will turn to credit products more quickly than millennials.
The draw of buy now, pay later
Generation Z is an age group that wields a sizable influence over consumer thinking. In recent years, the consumer mindset has changed tremendously, fueled a lot by Generation Z. They are a generation that demands seamless, digital experiences and expects the ability to check account balances as often as they’d like, is all about, “‘I don’t want to think about my payment. I don’t want the way I pay, and how I pay, to drive what I want to buy.
Younger people also tend to be more willing to try something new than older generations. And the ability to spread a purchase across multiple pay periods is understandably attractive for a 24-year-old consumer who does not have massive amounts of liquidity.
Generation Z‘s current interest in BNPL or debit cards may just be a function of age. In another five to 10 years, as they establish careers, increase their credit worthiness, and have more desire for credit, experts said, it’s likely their priorities will shift.
That kind of gradual development in payment preferences is what’s likely to keep young people moving in the direction of cards.
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