Gen Z faces skyrocketing credit card debt amid rising costs

In the United States, the surge in buy now, pay later services has alarmed financial experts, particularly regarding younger consumers. This trend has led to significant increases in credit card debt amongst Generation Z and millennials. Since March 2022, when the Federal Reserve began increasing interest rates, data shows that credit card balances for these age groups rose by more than 50%. As the holiday season approaches, shoppers are expected to spend 11.4% more than the previous year using these services, with estimates projecting $18.5 billion in purchases during the period from November 1 to December 31. Despite being marketed as low-interest or no-interest options, buy now, pay later plans can often lead to additional financial burdens. Experts warn that shoppers who use credit cards to pay for these plans might incur more fees and interest reliance. This dual burden of traditional credit card interest and buy now, pay later fees can result in consumers underestimating their financial commitments. Retailers have leveraged this trend, as studies show that the availability of such payment options can increase consumer spending, with reports indicating up to a 20% rise in spending when these services are offered. Consumer advocates are becoming increasingly concerned about how these services can lead shoppers to overextend their financial capacity. For many young people, the increasing cost of living and inflation have prompted a greater reliance on revolving credit, making the idea of buy now, pay later appealing as it creates an illusion of having more money available for spending. Experts such as Emily Childers from Credit Karma emphasize the precarious financial situations of young consumers, who often engage in overspending without sufficient regret or understanding of the long-term implications. The combination of factors including rising costs, increased reliance on credit, and the appeal of buy now, pay later services places Generation Z and millennials in a precarious financial position as they head into the holiday season. Their hesitation to confront their financial situations has led to potentially disastrous consequences, as they dive deeper into debt, illustrating an urgent need for financial education surrounding these modern payment methods and saving strategies.