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What the Gen Z Debt Data Shows
The Interest Rates are the Actual Problem
Real Progress Starts with a Lower Rate
Four Ways to Get Out of Debt Faster
The Debt Gap Can Be Closed
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Starting out in your twenties has never been easy. But the numbers behind Gen Z debt look different from any generation before. Not in a "kids these days" way, but in a real way that affects daily life. If you're in your twenties right now, you probably know exactly what we mean. It might be from personal experience, or it might be something you see your friends trying to figure out. Either way, it’s worth talking about.
What the Data Shows
In 2024, TransUnion published a study comparing Gen Z consumers aged 22–24 against Millennials at the same age a decade earlier. Gen Z carries a debt-to-income ratio of 16%, compared to roughly 12% for Millennials at the same stage, a four-point gap that holds up even after controlling for economic conditions.
A big part of the explanation is income. Inflation-adjusted, today's 22–24-year-olds bring home an average of $45,493, roughly $6,000 less than Millennials earned at the same age ten years ago.
When wages don't cover what things cost, credit fills the difference. It's been filling it at scale:
- 84% of Gen Z credit users in their early twenties had at least one credit card as of 2023, up from 61% of Millennials at the same age in 2013.
- Average balances reached $2,834, about 26% higher than what Millennials carried after adjusting for inflation.
Far from the frivolous spending older generations assume, these balances are coming from groceries, rent, car repairs — ordinary expenses that exceed the average paycheck. The debt is real, and it’s concerning. Thankfully, the path to getting on top of that debt is just as real.
The Interest Rates are the Actual Problem
Carrying a balance isn't the same as being in trouble. Carrying a balance at 25–29% interest is a different story.
The average credit card APR has hovered near record highs, and for younger borrowers without deep credit histories, the rates tend to sit at the higher end of that range. The balance doesn't just sit there. It grows. And that extra debt works against smart financial practices like saving, building credit, and getting ahead on rent.
And the longer you make minimum payments, the more that growing balance works against you.
Real Progress Starts with a Lower Rate
One of the most effective things you can do with a high-interest balance is move it somewhere cheaper. Not to avoid it, but to get more of your payment going toward the principal instead of disappearing into interest charges every month.
The mechanics are straightforward: apply for a lower-rate card, transfer the balance, and direct payments toward the principal rather than watching them be absorbed by interest charges. The key is having a payoff plan before you make the move. A lower rate helps, but it doesn't replace the discipline of paying it down.
Worth Knowing: Spero’s Classic credit card is built for situations like this. It's a lower-rate option designed to help you pay down balances without the oppressive interest of most major credit cards.
Four Ways to Get Out of Debt Faster
While moving to a lower rate solves the immediate interest problem, the most important work is building habits that keep your balance moving in the right direction. Here are some of the most effective ways to start chipping away at credit card debt.
- Pay more than the minimum.
Minimum payments are designed to keep you paying interest as long as possible. Even $25 or $50 above the minimum each month shortens the payoff timeline meaningfully.
- 2. Don't close the card after you pay it off.
It may seem strange, but closing an account can lower your credit score by reducing your available credit. Keep it open, use it occasionally, and pay it off to strengthen your credit score over time.
- 3. Watch utilization, not just balances.
Credit utilization is the percentage of your available credit you're using, and it matters a lot for your credit score. Keeping it under 30% is a good target. Under 10% is even better.
- 4. Build a small emergency fund before doubling down on debt.
Paying off debt aggressively without any savings means the first car repair or medical bill goes right back on the card. A cushion of $500 to $1,000 breaks that cycle.
The Debt Gap Can Be Closed
It’s no secret that Gen Z is beginning financial life in harder conditions than any living generation faced at the same age, but that isn’t a permanent reality. Tackling debt doesn't call for drastic measures, just consistent ones: moving high-interest debt to a lower-rate card, paying more than the minimum, and keeping utilization in check.
If you're a Spero Financial member carrying high-rate debt, let’s talk. We're here to help you find a smarter way to carry it while you pay it down.
This material is for educational purposes only and is not intended to provide specific advice or recommendations for any individual.
