A recent study by TransUnion, a global information and insights company, reveals that Gen Z consumers are grappling with more financial challenges than their Millennial counterparts did at the same age. The study, titled "Solving for Z," indicates that Gen Z consumers are utilizing credit at a higher rate and in different ways than Millennials did in their early adulthood.
The study compared the credit usage of today's Gen Z consumers with that of similarly aged Millennials a decade ago. It found that 75% of surveyed Gen Z consumers reported their finances being negatively impacted by the pandemic-induced recession, compared to 60% of Millennials who said the Global Financial Crisis had negatively impacted them.
"Gen Z consumers have seen their finances significantly impacted by the pandemic and its aftermath, even more so than the challenges faced by Millennials as a result of the Global Financial Crisis," said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.
The study also found that Gen Z borrowers are opening more credit lines and have both higher debt levels and delinquency rates compared to Millennials at the same age. However, Gen Z borrowers are also performing in a similar manner to younger generations of the past, typically having higher delinquency rates as a group than older ones.
The study revealed that 84% of credit-active Gen Z consumers had at least one credit card as of Q4 2023, significantly higher than the 61% of credit-active Millennials who had at least one card 10 years prior.
The increase in card usage among Gen Z consumers comes amidst elevated inflation. Since Q4 2013, the consumer price index has cumulatively risen 32%, driving many consumers to use their credit cards as a financial backstop to help with increasing costs.
The financial pressures brought on by inflation are likely a driving factor in the performance of today’s Gen Z consumers as compared to the Millennial group a decade prior. Gen Z saw higher consumer-level delinquency rates for auto and credit card, and in particular for personal loans, with nearly 10% more Gen Z borrowers 60 or more days past due compared to Millennials 10 years earlier.
“The performance of the youngest Gen Z borrowers is down across a number of credit products as compared to Millennials of the same age 10 years earlier,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion.
The study also indicates that Gen Z 22-24-year-olds report being more stressed out about their financial situation than Millennials who were 22-24-year-olds ten years ago.
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