Younger borrowers facing ticking credit card bomb

Is a credit card debt bomb in danger of exploding for younger borrowers?

The Federal Reserve Bank of New York said credit card borrowing hit a record high in the fourth quarter while delinquencies rose. A good deal of this borrowing and delinquencies came from Gen Z and millennials. With inflation raging and a potential recession lurking, delinquent debt could lead to catastrophic money problems, financial experts warn.

Gen Z’s credit card balances increased 30% last year, three times as much as the rest of the population, and they are “having a harder time paying off their credit cards as inflation increases,” credit analysis firm VantageScore says. Millennials and Gen Zers have credit card debt at least 60 days delinquent at far higher rates than older generations, according to credit industry site PYMNTS. And because millennials and Gen Zers are more likely to live paycheck to paycheck, they are vulnerable to financial shocks if they lose their jobs.  

Even employed young adults are at risk. A report from the Urban Institute found with inflation outpacing wage growth, young borrowers with credit card delinquencies, especially those in minority communities, “face financial burdens in other aspects of their lives.”

Meanwhile, as credit card interest rates soared to their highest level since 1999, Bankrate says Gen Z borrowers are the least likely to understand the fees and rates attached to their credit cards, so they might not even know how much they owe.