Published in: Credit Cards | Nov. 3, 2019

You'll Never Guess How Few Gen Zers Have Credit Cards

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Very few Gen Z consumers have credit. While this generation is still young, there are benefits to getting a credit card early. 

While millennials tend to get tons of attention when it comes to financial issues, they aren't the only generation whose money habits will affect the future economy. In fact, Gen Z is the newest-named generation and these young people, born between 1995 and 2015, are already  making their own money management choices. 

Experian recently took the pulse of the personal finance habits of this young generation by talking to recent high school graduates. It found that just 30% of Gen Z consumers currently have a credit card.

A Gen Z woman holds a credit card and looks at a laptop screen while her friend looks on.

Image source: Getty Images

While this isn't terribly surprising since many 18 and 19 year olds can only qualify for credit in certain circumstances, it does raise some important questions -- namely, when should young people get their first credit card and why have so many Gen Zers not yet hit that milestone? 

Most Gen Zers don't have credit cards yet

While age likely plays a role in why so few Gen Zers currently have credit cards, age alone doesn't explain the lack of participation in the credit market. According to a survey by The Ascent, 54% of all Americans got their first credit card aged 18-20.

And, the vast majority of Gen Zers surveyed by Experian -- a full 61% -- indicated they already have a checking account. These young people are participating in the financial services industry, but are opening a bank account without accessing a credit. 

The CARD Act, a consumer protection law passed in 2009, could perhaps help to explain why. The Act requires card issuers to ensure young people under aged 21 have sufficient income or have a cosigner before giving them credit. Many young people don't have enough income on their own to get a card. 

Another reason why so many Gen Zers do not have credit cards may be a lack of knowledge. Just 19% of Gen Zers indicated they had a solid grasp of how credit works. Without an understanding of credit, young people may not be aware of the benefits of credit cards or may simply not be sure how to go about getting one. 

Why many Gen Zers could benefit from credit cards

Getting a credit card could be an important financial step for the majority of Gen Zers who don't currently have one. Depending upon their age, young people could open up a credit card on their own or be added as an authorized user to an older relative's card. 

Parents or other trusted family members could also cosign for a credit card with members of Gen Z who are 18 and over but who don't yet have the credit history or income to get the most competitive credit cards for themselves. 

And while there are always risks to mis-using credit cards, there are also some big benefits for Gen Zers who can gain access to credit early -- perhaps even before they turn 18 and can legally apply for a card in their own name. When a young person gets access to credit, even as an authorized signer or on a cosigned credit card, this starts to establish his or her credit history.

A longer credit history, especially one with many on-time payments, enables young people to earn a higher credit score and qualify more easily for loans in the future. If parents or loved ones help Gen Zers to get a card early on, it could help them to build a credit history and teach them how to use credit responsibly.

These young people could potentially go on to have strong enough credit to qualify for private student loans without a cosigner, or to get the most competitive rates on auto loans or other debt they take on during college or shortly after graduation. 

Helping Gen Zers gain more access to credit

Two-thirds of Gen Zers have no credit at all, so there is definitely room for improvement. Parents should make it a point to talk with their children about the benefits of building credit early -- and should consider helping their kids get credit by adding them as authorized users or cosigning so they can get their own card.

Parents and children do need to agree on the parameters of credit card spending, though. And parents should make sure their teens use the cards responsibly and pay off bills on time to develop a positive payment history. 

Misuse of credit -- including running up a large balance -- could undermine any benefits for Gen Zers who join the minority of their generational cohorts in owning a credit card. However, learning to use credit responsibly from an early age can help Gen Zers build up good habits as well as a good credit score.

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