Gen Z Faces Rising Credit Card Debt

It seems like more and more members of Generation Z are finding themselves in credit card debt. A recent survey by Deloitte and ConsumerSignals revealed that, between the third quarter of 2023 and the second quarter of 2026, the percentage of Gen Z adults (ages 18 to 29) carrying credit card balances increased by more than 19%. The survey involved 1,000 U.S. adults each month from July 2022 to June 2026, with a margin of error of about 3 percentage points.

Interestingly, during this same timeframe, every other adult generation has seen a decline in credit card balances, with baby boomers experiencing the sharpest drop of nearly 26%.

Eileen Olson, a certified financial planner and founder of Emerald Wealth, points out that credit cards can be “one of the most expensive ways to borrow.” Current interest rates for credit cards are around 21%, according to the latest Federal Reserve data. This high rate means that balances can increase quickly and minimum payments can stretch small debts over years.

For Gen Z and others in similar situations, carrying credit card debt can lead to much higher costs than what was initially charged. The compounding nature of this debt can also make achieving other financial goals—like saving for emergencies or investing—quite challenging.

‘Living in Reaction Instead of with Intention’

Olson, who incorporates a behavioral finance approach in her practice, hypothesizes that the current consumer culture, which “is designed to sell us things,” may exacerbate the credit card debt issue among young people. The ease of using a card often masks the real act of spending money, leading to accumulating expenses without immediate concern, she remarks.

As a parent of a Gen Z daughter, Olson observes that her daughter and her friends are “generous, creative, and full of plans.” While these traits are admirable, they can sometimes result in overspending. Many Gen Zers are just beginning their careers, and, as a result, may not be earning at their peak yet. This situation can make it increasingly tough to manage financial responsibilities, especially with rising costs in essentials.

Young Americans are grappling with high prices for basic needs like housing and groceries, alongside hefty student loan payments. To complicate matters, recurring discretionary expenses, such as streaming services, and impulsive purchases can leave little financial breathing room. Olson notes that without a budgeting plan, people can find themselves “living in reaction instead of with intention.” When that happens, even unexpected costs can result in reliance on credit cards, pushing them into a survival mode.

This is why financial experts often advise building up emergency savings, which can prevent sudden expenses from throwing your budget off track. If someone is struggling to make ends meet, it may be essential to revisit their priorities and adjust spending habits to align with their values.

For instance, if someone wants to save for a house but is dining out frequently, those conflicting goals can work against each other.

Debt Repayment vs. Saving for the Future

Once a rainy day fund is in place, it’s worth figuring out how to juggle debt repayment and future savings. Generally, the recommendation is to focus on high-interest debt first. Olson explains that paying down existing debt can effectively earn a return similar to an investment. Historical data from Charles Schwab Asset Management indicates that from 1926 to 2025, the stock market’s annualized return has been about 10%, which is still significantly lower than the typical credit card interest rates exceeding 20%.

While carrying a credit card balance, you might be losing money monthly, as the accumulating interest increases what you owe. For example, a $5,000 balance at a 21% interest rate could result in a total repayment of $6,166 if paid off over two years at $256 a month. However, increasing that monthly payment to $350 could reduce the payoff period by seven months and save you around $362 in interest charges.

So, while investing can build wealth over time, it’s advisable to stop the financial “hemorrhaging” first.

“Paying off a card with a 20% interest rate is like securing a guaranteed 20% return,” Olson asserts. She also suggests maintaining a savings habit but to redirect those payments toward retirement contributions once the debt is settled.

Olson does mention one exception: she encourages individuals—even those with existing debt—to contribute enough to workplace retirement plans to capture the full employer match if available. “That’s free money,” she points out, equating to a 100% return for every dollar placed into the account. Following that, focus on using any extra funds to tackle high-interest debts.