Avocado Toast Isn't The Problem: Gen Z Faces Maximum Credit Card Debt And Lower Earnings Compared To Any Other Generation, Finds The Fed

In an era where Gen Z has had to graduate during a pandemic and grapple with intense economic challenges, they are also struggling to survive amid rising living costs. This generation has now become the one with the highest credit card debt.

A recent report by the Federal Reserve found that 15.3% of Gen Z are maxing out their credit cards and falling into debt, compared to 12.1% of Millennials, 9.6% of Gen X, and 4.8% of Baby Boomers.

"In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups," said Joelle Scally, Regional Economic Principal within the Household and Public Policy Research Division at the New York Fed. "An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households."

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Fresh out of college, many Gen Z individuals are trying to navigate an economy significantly reshaped by the COVID-19 pandemic. High interest rates, job market instability, and inflation have compounded their financial challenges. 

Gen Z has the lowest credit history and available credit, making it easier for them to max out their credit cards.

According to Handshake, Gen Z defines a high starting salary as $82,000 on average. Despite this, they face substantial financial burdens.

A similar report by TransUnion found that 22- to 24-year-olds today make less than those of the same age a decade ago.

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The report found that 20-somethings today take home around $45,500, while Millennials earned $51,852 when adjusted for inflation.

Moreover, Gen Z’s debt-to-income ratio, including all forms of debt, is 16.05%, compared to 11.76% for Millennials. 

According to the Federal Reserve report, household debt continues to grow in the U.S., with Americans now owing a collective $1.12 trillion on their credit cards.

These financial challenges highlight Gen Z’s unique economic pressures, making it clear that the issue goes far beyond avocado toast.

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