Research finds Gen Z credit card usage is widespread

New research by MoneySuperMarket finds Gen Z are some of Britain’s savviest credit card users, confidently using them as a tool to manage spending and reach long-term personal finance goals.

Despite being a form of payment thought to be declining in popularity among young adults, well over half (59%) of 18–24-year-olds own one.

Moneysupermarket said , myths about how credit cards work and the impact they can have on credit scores persist with this age group. With the personal finance world in a state of constant revolution and following the rise in popularity of Buy Now Pay Later (BNPL) credit, the UK’s leading price comparison surveyed two thousand 18- to 24-year-olds to understand their views on credit cards.

Far from using their credit cards irresponsibly, 28% specifically got a credit card to build and boost their credit scores, and a further 24% opted for one as they believe them to be a useful personal finance tool in managing their spending.

Nearly a quarter (23%) opted for a credit card because of the rewards, such as air miles, cashback and other perks on offer, while a further 22% took one out because of the free protection they provide on purchases over £100.

Two fifths (39%) pay off their credit card balance in full each month, while 25% pay off as much as they can, and 16% make the minimum payment.

While levels of credit card know-how are high among Gen Z, this age group does have a general wariness of debt which is influencing their willingness to take out a credit card.

Nearly one third (29%) feel uncomfortable having to borrow money over longer periods of time and a fifth (21%) attribute their aversion to borrowing to being brought up in the aftermath of the global financial crisis.  A further fifth (20%) believe that you shouldn’t spend money that you don’t have, while 19% do not feel comfortable about borrowing because they’ll never be able to pay anything back due to their current circumstances.

Despite a lot of sensible usage, understanding about how credit cards can impact credit scores is low. When asked whether they agreed with the statement, ‘credit cards can be good for your credit rating’, only 30% believed that they could be.

Similarly, only a quarter knew (27%) that credit cards need to be paid back in full each month, otherwise interest builds (apart from interest-free deals where the minimum must be paid during the deal’s term), while a further quarter (24%) felt they had a strong understanding of how credit cards worked.

Likewise, the benefits of credit cards were poorly understood by many young people: only 23% thought credit cards had some great benefits; while only 25% knew that some credit cards provided interest-free fixed periods for balance transfers and purchases.

Over one in ten (12%) said their parents had put them off getting a credit card and a similar figure (11%) felt that credit cards were for people at a different life stage.

Jo Thornhill, Money Expert at MoneySuperMarket, said “We’re bombarded daily with negative stereotypes about Gen Z so it’s really positive to see so many of them using credit cards responsibly as part of their wider money management. When used sensibly credit cards can provide a flexible alternative to other methods of payments, while building a credit rating at the same time. It’s reassuring that so many 18–24-year-olds have credit cards for the principal purpose of building their credit scores.”

“However, what we’ve also found is that – for many Gen Z’s – a lot of myths and misunderstandings abound about credit cards. It’s not uncommon, for example, to hear people say that credit cards are only for rich people, and that you need a certain amount of money to open an account. “Above all, they’re still seen by many as a risk, but the reality is if you’re making your monthly payments, credit cards can provide you with a host of benefits – from retail perks to interest free payments on purchases and balance transfers. Nearly a quarter (23%) of those we spoke to know this and use their cards to enjoy rewards like `air miles and cashback.”

“With the support of our social media influencers Sul, Talk Twenties, Thrifty Londoner, and Alice Tate, we’re aiming to dispel some of the common myths held about credit cards and provide young people with the knowledge and understanding required to make better financial decisions. With so many different types of credit cards available, we believe it’s important that younger people have the help they need to decide whether getting one is right for them.”

“It may well be that it’s not, in which case they shouldn’t bother. But if you have a big purchase coming up or you need to build your credit score with a view to getting a mortgage, for example, a credit card could be a sensible solution to help reach those goals.”