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A new survey finds more than two-thirds of Gen Z consumers (68%) report that credit card bills cause them stress and anxiety, while more than half (51%) say credit cards give them the “ick.”
The Morning Consult survey of about 5,400 Americans taken earlier this year and commissioned by Afterpay, a provider of buy now, pay later (BNPL) financing, comes as rising interest rates have caused APRs (annual percentage rates) on credit cards to spike.
Credit cards are also increasingly competing against emerging payment solutions, including peer-to-peer payment services such as Venmo, PayPal, and Afterpay-integrated Cash App, as well as mobile wallets such as Google Pay and Apple Pay.
Afterpay’s study found that Gen Zers primarily use debit cards (cited by 68%) and cash (67%) for payments, followed by peer-to-peer payment services (51%) and mobile wallets (50%). Only 35% actively make purchases with a credit card.
Among boomers, 68% actively make purchases with credit cards, with a lower rate of credit card usage also seen among millennials (47%) and Gen X (49%).
The caution by younger demographics over credit cards shows a strong awareness of related debt risks. Of the overall respondents, 82% consider credit cards to be “financially dangerous,” with 70% agreeing that credit cards make them feel like “theyʼre spending money they don’t have.”
Part of the fear of credit cards is a lack of understanding of complicated card terms, particularly among Gen Z (57%). Forty percent of overall credit card users (53% of Gen Zers) have been surprised by the amount of interest they pay on their bill.
One of the main benefits of using a credit card is the ability to earn cash back or travel rewards on purchases.
A recent Bankrate survey, however, found that while 80% of U.S. credit card holders make at least some effort to earn rewards, 72% carry a balance from month to month, meaning the interest charges on an unpaid balance likely outweigh those rewards.
“It doesn’t make sense to pay 20%, 25% or 30% in interest just to earn a few percentage points in cash back or travel rewards,” states Ted Rossman, Bankrate senior industry analyst.
Following the increases in interest rates, the average credit card interest rate in the U.S. is now 24.2%, up from about 16% in 2022.
The average retail credit card interest rate in September 2024, the month the Federal Reserve shifted to reducing rates, reached a record high of 30.4%, up from 24.4% in 2021, according to analysis by Bankrate.com.
Credit card delinquencies recently reached their highest levels in over a decade. Per October 2024 CivicScience data, 56% of credit card users report they have some kind of revolving credit card debt, as higher interest rates have made it harder for them to pay off their balances.
Beyond offering rewards, credit cards still hold other advantages over their main card payments competitor, debit cards, including helping an individual build credit and offering better protection against fraud. Many no longer require annual fees