How credit card use differs by generation
Young Americans are racking up credit card debt faster than older generations. In time from the United States
Young Americans are racking up credit card debt faster than older generations. Since the US economy shut down due to the pandemic in the spring of 2020, their credit card debt has increased more on average, while older generations have seen their average credit card debt balances decline, according to Experian.
To better understand how credit card usage compares across generations, Experian analyzed the drinking habits of different age groups using data from the first quarter (Q1) of 2022, the most recent data available. It turns out that it’s the older generations who have been able to pay off more credit card debt in recent years. The Silent Generation, born from 1928 to 1945, and Baby Boomers, born from 1946 to 1964, also have the highest average credit scores of any generation.
But no one uses credit like Gen Xers, who are entering or already in their prime earning years. Born between 1965 and 1981, they have averaged $7,000 in credit card debt since the pandemic began.
All adults under the age of 42 are Millennials and Gen Z – the oldest members of Gen Z will be 25 this year and the oldest of Gen Y will be 41. These are the young Americans whose average credit card debt has increased the most compared to other generations over the past two years.
Read on to learn about which US consumers have the most credit debt and how credit card habits are changing from generation to generation.
Baby boomers, Gen Xers have the most credit cards on average
Americans who are middle-aged or older — Gen Xers and baby boomers — hold the most credit cards, averaging more than four per person. Gen Zers held only half of that, that is, among those who were old enough to have credit cards. (Gen Z is ages 9 to 25 this year.) The youngest adult consumers, ages 18 to 25, averaged two credit cards each, with only a slight increase between 2021 and 2022.
Younger generations are seeing the fastest growth in their credit card balances during the pandemic
Since the start of the COVID-19 pandemic, Gen Z and Millennials’ credit card debt has grown at a faster rate than other generations.
The average Gen Z credit card balance increased from $1,947 in April 2020 to $2,443 in January 2022, an increase of 25.5%. The average credit card balance of millennials increased by 13.8% over the same period. Generation X credit card balances have also increased, but at a near zero rate of 0.5%.
Older Americans — the silent generation and baby boomers — have paid off their credit card debt in those two years in enough numbers to drive down their average balance. Baby boomers saw their average credit card balance decline by more than 6% from April 2020 to January 2022, and the silent generation’s average balance declined by more than 4% over the same period.
Credit utilization ratios increased for Gen Z and Millennials
To look at use of credit, which measures credit card balances against credit limits, baby boomers and members of the silent generation use the least available credit on average compared to other generations. Because these consumers have had many more years to accumulate savings and build credit histories on average than younger generations, they often enjoy greater financial security and benefit from higher credit limits.
In Q1 2022, Gen Z used 23% of their available credit, the highest average usage rate of any generation. With less experience and less time to build their credit history, Gen Zers on average have lower credit scores and are also more likely to have lower credit limits.
All generations saw their credit rating increase in 2021
Whether they recently graduated from college or are preparing for retirement, consumers saw their average FICO score increase slightly between the first quarter of 2021 and the first quarter of 2022.
The older the credit account holder, the higher their FICO score tends to be on average. Baby boomers and the silent generation have had decades longer to establish their payment history, the length of their credit history, and different types of credit accounts, among other financial activities noted on a person’s credit report. . Baby boomers and the silent generation have average FICO scores above the national average of 714, according to Experian.
This story originally appeared on Experian and was produced and distributed in partnership with Stacker Studio.