There are currently 31.4 million credit-eligible Gen Z-ers. And, according to TransUnion’s prediction, the next three years will bring that figure to 44 million. Find out how that’s affecting the credit card market.
Gen Z-ers significantly drove credit card market growth during the first half of 2019, according to a new report from TransUnion.
And most of that growth is the result of credit cards being the most popular financial product among Gen Z-ers. Fifty-five percent, or around 14 million, of these consumers carry a balance, according to TransUnion’s Industry Insights Report for the second quarter.
Still, Gen Z-ers – born in 1995 or after – make up only 5 percent of Americans who carry credit card debt.
As of Q2 2019, there were 31.4 million credit-eligible Gen Z-ers. TransUnion expects that number to rise to around 44 million over the next three years.
“Both the newest and oldest members of the credit-eligible Gen Z generation are beginning to enter the credit market for the very first time,” Matt Komos, vice president of research and consulting at TransUnion, said in an Aug. 14 press release.
As Gen Z starts to use credit for the first time, the majority are gravitating toward credit cards in comparison to other credit products, said Kristen Bataillon, senior manager of research and consulting, TransUnion.
“While Gen Z currently accounts for 5.2 percent of market share in the bankcard market, these credit-active consumers are performing on par with members of other generations,” Bataillon said.
See related: Best credit cards for Gen Z
Gen Z-ers need to develop good credit habits
Bad credit is expensive, so it’s important that as Gen Z-ers become a force in the credit card market they establish healthy credit habits that can help them build strong financial futures.
“We encourage Gen Z, and every generation, to seek out credit education tools that will help them take control of their path toward better credit health,” said Amy Thomann, head of consumer credit education at TransUnion.
And the good news is, they are – but not just regarding credit cards.
At the May 2019 Card Forum, Paul Siegfried, senior vice president and credit card business leader at TransUnion, discussed how younger millennials and Gen Z-ers are particularly wary of open-ended credit card balances – perhaps because of student loans or starting salaries that don’t stretch as far as they’d like.
“They’re gravitating instead to debt with a fixed term and clear monthly payments,” added Ted Rossman, senior industry analyst at CreditCards.com.
And now, Gen Z-ers are accessing credit in the form of fixed terms and payments more than ever.
For example, according to TransUnion’s report, personal loans grew 45 percent among Gen Z-ers from Q2 2018 to Q2 2019.
How to keep your credit in great shape
A personal loan can be a good alternative to a credit cards if the interest rate is lower and you don’t borrow more than you can pay off in a reasonable amount of time.
Whether you use credit cards or personal loans, there are a number of ways you can maintain healthy credit habits.
Pay your bills on time and in full if you can swing it, keep your debt-to-income ratio low, avoid maxing out your credit card accounts and monitor your credit reports.
Do this and you’ll keep your credit in the best shape possible.