Gen Z — the generation that puts the highest price tag on success — is also the most likely to pull out a credit card when it’s time to pay. Recent research indicates that the average credit card balance for people aged 22-24 is $2,834 — a quarter higher than the average for Millennials a decade ago.¹

As this generation enters the workforce and gains financial independence, their use of credit cards is on the rise. According to recent surveys, 84% of Gen Z has at least one credit card.² Among those who do, 50% put their total spending on plastic.³

Fewer earning years plus credit card debt often translates into a high balance — all while interest rates remain high and real salary growth remains mostly flat. Given the unique set of financial challenges Gen Z faces — student loan debt, rising living costs, and an uncertain job market — credit cards may seem like an easy solution to financial pressures.⁴

Getting carded

Gen Z consumers are using credit more than their Millennial counterparts did at the same age, with a marked increase in credit card usage. By contrast, 61% of Millennials had one credit card a decade prior — 23% lower than their Gen Z counterparts.⁵ Credit card debt ranks as the second-most important factor in their finances.⁶

This uptick comes amid economic pressures, including the pandemic and inflation, which have affected younger generations’ financial habits.⁷ The Consumer Price Index has increased 32% since 2013.⁸ Credit card interest rates are at their highest point in decades, hovering at 23.37%.⁹ Non-housing debt stood at $4.96 trillion dollars across all American households in the first quarter of 2024.¹⁰

During the depths of the pandemic — which is also when Gen Z began graduating college and entering the workforce — credit card underwriting rules loosened, giving this generation a way to pay for goods in uncertain times.^11,12

Five years later, Gen Z is still opening more credit lines and managing higher debt levels, facing higher delinquency rates as a result. 

Read more: How many credit cards do I need?

Strategies for taming credit card debt

Although credit card debt can feel daunting, there are several steps any generation can take to tackle it. Incremental progress, such as creating (and sticking to) a budget, can lead to bigger measures that make a major difference. 

1. Create a budget to control spending

A solid budget is the foundation for minimizing overreliance on credit cards. Understanding one’s own income and expenses can lead to more informed decisions about when and how to use credit cards.

The most common way to start a budget is by tracking monthly income, categorizing expenses, and setting spending limits for discretionary purchases. Budgeting apps can provide a comprehensive view of financial health and help keep spending on track.

Developing a habit of budgeting early on can help individuals avoid impulsive purchases and the cycle of accumulating debt. Using credit cards becomes a more deliberate decision when there’s a clear budget in place, which can reduce the likelihood of overspending. Budgeting can be particularly useful for Gen Z spenders, who are setting up their financial patterns and habits for later into adulthood.¹³ 

2. Pay more than the minimum payment

Credit card companies often entice consumers with low minimum payments.¹⁴ Paying only the minimum will not help reduce overall debt quickly, however. Making only the minimum payment on a credit card balance can extend repayment periods and increase the total cost of the debt over time due to accumulated interest.

For example, if a person has a $5,000 credit card balance and only makes a minimum payment of $200 per month, it would take them 35 months — a little less than three years — to pay off the balance. A minimum payment of $100 would take more than 15 years. This assumes there are no additional charges or fees on the card in that time.

Credit card interest can become more of a financial challenge than the balance itself.¹⁵ Paying more than the minimum due each month is a commonly suggested approach to reducing debt faster. This approach will decrease the balance faster and lower the interest costs. If possible, focusing on paying off higher-interest debt first can accelerate debt reduction and provide financial relief more quickly.

3. Maximize rewards without overspending

Rewards credit cards can be an effective way to earn cash back, points, or travel miles on everyday purchases. Using a rewards card also comes with the need to avoid overspending. It can be tempting to view credit cards as an excuse to indulge, or a means to see the world through travel points, but excessive spending can quickly erase the cash value of rewards earned.

To make the most of rewards, focus on using cards for necessary expenses, such as groceries, gas, or utilities. Ensuring that the balance is paid off in full each month can help individuals enjoy the benefits of rewards while minimizing the financial burden that interest rates can create.

4. Automate payments and set alerts

Automatic payments can help prevent late fees and missed payments, which can damage credit scores and add unnecessary costs. Most credit card companies offer the ability to set up automatic payments for at least the minimum payment. This helps ensure that credit card bills are paid on time, reducing the risk of late fees and interest charges.

In addition to automation, setting up spending and due date alerts can provide helpful reminders to avoid overspending and to ensure timely payments. These small steps can help keep credit card use in check.

5. Transfer high-interest debt to a 0% APR card (with caution)

For individuals already carrying credit card balances, transferring them to a credit card offering a 0% introductory APR can be an effective way to reduce interest costs temporarily. Many cards offer a 0% APR for the first 12 to 18 months, providing an opportunity to pay down existing debt without accruing more interest.

It is important to consider the balance transfer fees and understand the terms of the card once the introductory period ends. Any balance that’s left over when the introductory APR expires is subject to the card’s normal rate. If possible, paying off the transferred balance within the introductory period is advised in order to avoid increased interest rates.

6. Build credit over time

One of the key benefits of using credit cards responsibly is the ability to build a strong credit score. A higher credit score can open the door to better financial opportunities, such as lower interest rates on loans and reduced insurance premiums.¹⁶

To build and maintain a strong credit score, it is important to keep the credit utilization ratio below 30%.¹⁷ For example, with a $2,000 credit limit, carrying a balance of no more than $600 will help maintain a favorable credit score.¹⁸ Regularly paying off credit card balances on time and avoiding maxing out credit limits are essential for improving credit over time.

7. Keep credit card balances low

The best way to manage credit card debt is to avoid carrying a balance whenever possible. If carrying a balance is unavoidable, making repayment a priority can help reduce the interest paid and keep other financial obligations manageable.

Keeping balances low can reduce interest payments, and may reinforce the use of credit cards as a means to boost creditworthiness.

Read more: Generation Money: Gen Z’s snapshot

Keeping credit in check

Credit cards can be a valuable financial tool for Gen Z, but their benefits come with the responsibility to manage them carefully. By implementing strategies like creating a budget, paying off debt quickly, and maximizing rewards without overspending, credit cards can become an asset rather than a financial burden.

Developing strong financial habits early can set the stage for long-term success. By staying disciplined with spending, using credit cards strategically, and building credit over time, individuals can enjoy the benefits of credit cards while avoiding the risks of overwhelming debt. The key to successful credit card use lies in maintaining balance and making informed, responsible financial decisions.