Archive · 27 Jul 2026
Gen Z's Credit Card Debt Crisis
Gen Z is using credit cards more and more, but this can lead to big problems.
Many young people are getting credit cards and using them a lot, sometimes even taking extra loans.
Experts say it's important to save at least 20% of your income and not spend more than 20-30% on credit cards.
Paying only the minimum can cause a lot of extra fees and interest.
It's also important to watch out for signs of too much debt, like using credit for essentials or feeling anxious before payment dates.
Using EMI conversion for purchases can help sometimes, but it's important to understand all the costs involved.
To stay out of debt, it's best to pay off credit cards in full each month, keep credit utilisation low, and avoid applying for multiple cards or loans at the same time.
Gen Z is adopting credit cards earlier, with many accumulating significant balances and taking additional unsecured loans within a year.
Experts recommend limiting credit card spending to 20-30% of take-home income while keeping savings at 20% or more.
Paying only the minimum due can trigger high interest costs, GST, late charges, and loss of the interest-free repayment period.
Warning signs of overleveraging include relying on credit for essentials, paying only minimum dues, and frequently using EMI conversions.
Building a strong credit score requires timely full repayments, low credit utilisation, and avoiding multiple loan or card applications together.
- Who
- Gen Z consumers aged 30 or below.
- What
- Gen Z is adopting credit cards earlier, accumulating significant balances and taking additional unsecured loans quickly.
- When
- In March 2026, Gen Z made up half of all first-time credit card customers.
- Where
- The trend is observed in the credit card market.
- Why
- Gen Z is entering the credit card market earlier and is already saddled with debt, building balances faster and adding fresh credit sooner.
Financial Discipline Advocates
Credit Card Issuers
Credit Card Spending Limits
Financial Discipline Advocates
Limit credit card spending to 20-30% of take-home income and prioritize savings of at least 20% of income.
Credit Card Issuers
Offer higher credit limits and EMI conversion options to increase spending and revenue.
EMI Conversion
Financial Discipline Advocates
Use EMI conversion sparingly and only for small amounts when necessary, considering all associated costs.
Credit Card Issuers
Promote EMI conversion as a convenient option for managing large purchases, potentially increasing customer debt.
- Gen Z Credit Card Usage
- In March 2026, Gen Z consumers aged 30 or below made up half of all first-time credit card customers.
- Credit Card Balances
- 28% of Gen Z had balances of Rs 25,000 or more within three months of receiving their first card.
- Additional Unsecured Loans
- 69% of Gen Z took on another unsecured loan within a year.
- Recommended Savings
- Ideally, savings should be at least 20% of take-home income.
- Credit Card Spending
- Credit card spending should be restricted to 20-30% of take-home income.
- Total EMI Obligations
- Total EMI obligations should remain below 35-40% of take-home income.
- Credit Utilisation
- Overall credit utilisation should be kept below 30%, with 10-20% being preferable.
- Credit Card Interest Rates
- Annualised credit card interest rates range from 36-48% or higher.