Timothy Danikowski was ready to start his adult life. After four years in a small college town and a fifth year back at home thanks to the pandemic, he finally moved to Seattle in 2021. Soon after, Danikowski landed a respectable accounting job, moved into his own apartment, and signed up for his first credit card, which he intended to use only for emergencies.
At first Danikowski kept on top of his balance well enough, but soon his compulsive shopping addiction and desire to see the world broke his discipline. "I built up points to travel," he told me. "But when I travel, I want to go shopping, and that's where the spending gets out of control."
In three years, Danikowski has racked up about $15,000 in debt across three cards, one of which has an interest rate of 28%. He makes his minimum payments each month — a task that has become much harder since he lost his job this year — and tries to resist the urge to keep using the cards, but his balance doesn't budge.
"When it comes to everyday things, I choose comfort over everything else," he said.
Danikowski and many other Gen Zers are rapidly building up credit-card debt. A TransUnion study found that, adjusting for inflation, the average credit-card balance for someone who was 22 to 24 at the end of last year was $2,834, a 26% increase from the average figure for millennials who were the same age a decade ago. The study also suggested that Gen Zers were much more comfortable with credit cards than prior generations were: They were opening more cards, were more likely to fall behind on payments, and were using the cards for more types of purchases. Alev told me Credit Karma data shows Gen Zers are acquiring debt at a faster rate than any other age group. The combination of an increasingly turbulent economy and Gen Zers' desire to make up for lost time via pandemic "revenge spending" has left many members of the generation overly reliant on credit.
"Gen Z really prioritizes fun over finances when it comes to things like eating out, shopping, and travel," says Courtney Alev, a consumer advocate at Credit Karma. "That combined with the fact that they have just had fewer earning years explains why their credit-card debt is growing at a faster rate."
While Gen Zers' overall debt levels are still lower than older generations', young consumers' early reliance on credit cards puts their financial futures at risk. "The financial burdens that Gen Z is facing today can really have long-lasting effects on their lives," Alev says, "including their ability to achieve key milestones, such as delaying big moments like marriage, buying a home, or starting families until they feel more financially secure."
Part of Gen Zers' interest in credit cards is simply the march of technological progress. The digital natives have more payment options than any generation before them, and they've embraced electronic payments and alternative credit methods like digital wallets and buy-now-pay-later apps. Meanwhile, credit-card companies have targeted young people as eager new customers.
There are also some acute financial reasons Gen Zers have been jumping headfirst into the credit pool. Pandemic restrictions, inflation, and high interest rates hit them hard as they were starting their professional careers and getting their financial footing. As young people sought solutions to financial stresses, and as credit-card balances fell, credit-card companies were more than willing to make Gen Zers an offer. The companies made getting credit easier in 2021 and 2022 by allowing people with lower credit scores to access cards for which they previously would have been ineligible. Young people opened credit cards at a faster rate than any other age group during the pandemic.
The temptation to use those cards was strong. Credit Karma found that its Gen Z members' average credit-card debt increased by 3.2% from the first quarter to the second quarter of 2024, while the average debt for millennials, Gen Xers, and baby boomers increased by 2.4%, 2%, and 1.6%. While credit-card balances in the US decreased early in the pandemic, it didn't take long for American consumers to start racking up debt again. Credit-card balances have risen by $396 billion since the first quarter of 2021, a 51% increase.
I couldn't afford to live, but I'm in a new city, and I want to go out and meet people. I called those my fun expenses. I started putting all of that on my credit card.
Some people accumulated credit-card debt in a wave of post-pandemic revenge spending; some were chasing points and rewards. Still others said they racked up big bills because they couldn't afford not to. Regardless of the reasons, it's clear that many Gen Zers are comfortable with their little pieces of plastic.
Danikowski, for example, told me he fell into the credit-card trap after acquiring an American Express gold travel card with a sky-high annual percentage rate. The card let him build up points, which allowed him to continue traveling. "I got so used to this lifestyle I lived for the last three years that it became hard for me to cut back," he says.
Others, like Nico, a 27-year-old advertising strategist, got caught in a post-pandemic spending cycle. After graduating from college in 2020, Nico moved back home with his mom to save money while working remotely. By late 2021, Nico was ready for a change. After he moved to Chicago, he started using his credit card way more. He was struggling to make his $1,100 rent on a $36,000 salary. In addition to paying his bills and making sure he had groceries, Nico was trying to make new friends in the city.
"I couldn't afford to live, but I'm in a new city, and I want to go out and meet people. I called those my fun expenses," he says. "I started putting all of that on my credit card."
Nico kept reaching his credit limit, and the credit-card company kept extending it. Three years later, he has about $20,000 in credit-card debt and a monthly minimum payment of $400, nearly all of which goes toward interest. Landing a higher-paying job has helped him start to get a handle on the debt, he said. He's stopped using the card and tries to make a payment of $700 to $900 each month in hopes of bringing his total down.
Credit proved vital for Emmaline, a 27-year-old web developer in North Carolina, when she had to make ends meet during a career pivot. She racked up $6,000 in credit-card debt while attending a full-time coding boot camp, using the card to to pay for groceries, car maintenance and insurance, and other life expenses. While the card was a lifeline as she tried to set herself up for a successful career, she felt ashamed and worried about her debt, she tells me. For a long time she kept it a secret. This year she finally opened up to family members, who helped her make a plan to pay it down and offered some financial assistance. After spending a few months throwing nearly every penny she had at the debt, Emmaline was able to pay it all off in November.
"I made sure I was only eating beans and leaving myself money for gas," she says. "I let out a tear or two of pure joy and relief when it was finally paid off."
Gen Zers are far from alone in racking up credit-card debt: The total credit-card balance held by US consumers surpassed $1 trillion in 2023. The number of Americans struggling to pay off their loans is also rising. But the particular danger for Gen Zers is becoming so reliant on credit cards so early in their financial lives. Higher debt, Alev says, can lead to lower credit scores that could make it more difficult to pay for things like a house or a car. From March 2022 to February 2024, the percentage of Credit Karma's Gen Z members with subprime credit, meaning a score below 600, rose by 8 points, to 33% from 25%, while the percentage of millennials with subprime credit scores increased by 6 points. Credit Karma said the average Gen Z credit score dropped to 659 in the second quarter from 671 in the first quarter.
Credit-card debt is an invisible problem. You can't see it. It veils you in shame. It eats you like a parasite.
William, a 27-year-old emergency medical technician in Colorado, has about $20,000 in credit-card debt, accumulated over 4 ½ years. His first job out of college in 2020 came with a salary of $27,000. Struggling to get by, William primarily used his credit card for necessities like groceries, bills, and car maintenance. But when a health emergency kept him out of work for weeks, his balance snowballed. These days, William makes his minimum payment, but nearly all of it goes to interest. He says he once dreamed of moving abroad and teaching English but has accepted that his credit-card debt keeps him tethered to a reliable source of income stateside.
"I'd like to have a family one day and be able to settle down and raise kids, give them a good life," William says. "But that's not something I can do until I have a better hold on this."
It's not clear that Gen Zers' habits will change anytime soon. The Federal Reserve Bank of New York said in August that younger debt-holders were more likely to be delinquent on their credit-card payments than older ones. Falling behind on these payments has given young people a bleak outlook.
"Credit-card debt is an invisible problem," Emmaline says. "You can't see it. It veils you in shame. It eats you like a parasite."
Alev says there are some steps people can take to try to escape credit debt. First and foremost, she cautions people to stay as far away from high-interest debt as possible. She also advises debt-holders to stop using that credit line and make a plan to pay down the debt, such as transferring the debt to a personal loan at a lower interest rate.
Most important, she says, members of the credit-card generation shouldn't bury their heads in the sand. She recommends people create a spreadsheet listing all their debts along with minimum payments, interest rates, and consolidation options.
When William feels suffocated by his monthly payments and interest rate, he can feel tempted to rack up even more debt. "Someone is always willing to give you another credit card," he says.
Danikowski, meanwhile, said feeling hopeless about his debt was pointless. Though he lost his job this year, he still took trips to Europe and New York.
"I know it's not a good decision," he says. "But at least I've gotten to see the world."
Erin Snodgrass is a senior reporter at Business Insider.