Younger consumers in Texas are more likely to own credit cards than previous generations at the same age, and they tend to use them more frequently. While this can lead to more delinquencies, it could also result in higher credit scores over time.
The Federal Reserve Bank of Dallas recently examined the credit card habits of Gen Z in the state and found that they use credit differently compared to millennials and Gen X at the same age. Some 60% of Gen Z respondents had at least one credit card in their early 20s, compared with 54.5% of millennials and 57% of Gen X consumers at those ages.
With higher card ownership, Gen Z also uses credit cards more than previous generations. Nearly a third of this generation had a credit card that was 75% or more of its credit limit, which is higher than other generations.
But here’s an interesting twist: when the Federal Reserve Bank of Dallas looked only at those with credit cards—rather than the entire generation—Gen Z fell to the bottom of the list. Just 28% of Gen Z cardholders reached that 75% credit limit, compared to 33% of millennials and 37% of Gen X.
It’s important to note that this data focuses on a small group of consumers from one state, rather than looking at a wider audience. However, these generational differences persist despite other studies showing that younger generations are more rate-conscious. Gen Z, for example, uses credit cards more for shopping and dining, while baby boomers spend more on fuel and hotel lodging. As a result, younger generations are less focused on rewards and more concerned with rates and terms.
The Effects of Higher Usage
Looking at older generations, the Federal Reserve Bank of Dallas found two divergent paths when it comes to credit card usage. Millennials with higher card usage in their 20s saw an average of 21% of their lines of credit become seriously delinquent in the next decade. For members of the same generation who had lower credit card usage rates in their 20s, just 9% of their lines of credit became seriously delinquent.
However, when younger cardholders live within their limits, that additional usage often pays off. Millennials who used credit cards at lower-than-average rates in their early 20s had an average 62-point higher credit score in their early 30s compared to their peers.
