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50% of Gen Z has a credit card and a prime credit score—and they're more credit active than millennials were

A new TransUnion study found that 50% of Gen Z has a credit card and prime or above credit scores, surpassing millennials when they were the same age.

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Younger generations often get a bad rap for how they manage their finances and among the many sticking points, they typically opt for debit or cash over using credit cards. But a new study from TransUnion found that 50% of "credit-active" Gen Z (18 to 24 in 2019) in the U.S. have a credit card.

"Gen Z is showing this appetite for credit," Matt Komos, VP of financial services and consulting at TransUnion, tells CNBC Select. "Credit cards are a typical entry point for lenders and banks, and we're seeing that it's still the case with Gen Z consumers."

The study looked at 33 million Gen Z consumers who opened a traditional lending product, such as a credit card, auto loan, mortgage, personal loan or student loan — deeming them "credit active." These consumers were located in established consumer credit markets including the U.S., Canada and Hong Kong, as well as emerging credit markets including Colombia, India and South Africa.

Below, CNBC Select breaks down the key takeaways from TransUnion's study.

Credit habits compared: Gen Z vs. millennials

TransUnion compared the credit activity and performance of millennials (25 to 39 in 2019) and Gen Z consumers in the U.S. To have a true "apples to apples" comparison, TransUnion observed millennials who were between the ages of 18 and 24 years old in 2012 and Gen Z consumers who were 18 to 24 years old as of 2019, adjusted for risk and age differences.

The comparison found a difference between which products each generation preferred. Gen Z favored credit cards (41%) over student loans (37%) while millennials were the reverse — student loans (44%) and credit cards (34%).

Here's a breakdown of the most popular credit products for Gen Z and millennials.

Most popular credit products among Gen Z and millennials

Generation Auto Credit card Private label card Mortgage Unsecured personal loan Student Loan
Millennial16%34%24%2%3%44%
Gen Z23%41%20%2%4%37%

Source: TransUnion, percentage of credit-active consumers

"Young consumers today are better educated about their credit," Komos says. They can benefit from numerous tools and resources, such as free credit scores and credit score simulators that show the potential impact of paying off debt or opening a credit card.

While it may seem that younger consumers pose a greater risk to lenders, half of credit-active Gen Z consumers are prime and above (VantageScore 661+), compared to the 39% of credit-active millennials who were prime and above at the same age. This is promising since a good credit score is key to qualifying for the best interest rates and best credit cards.

For example, if you want to maximize rewards with a cash-back card like the Citi Double Cash® Card (see rates and fees.), you'll need excellent credit. And if you want to pay off credit card debt with an intro 0% APR period for 15 months from the date of account opening (then 16.24% - 26.24% variable APR), the Amex EveryDay® Credit Card requires good or excellent credit. See rates and fees.

Gen Z credit use around the globe

Of all regions, Gen Z consumers located in the U.S. were the most credit active, at 66%. Here's how the other markets stacked up:

  • United States: 66%
  • Canada: 63%
  • Hong Kong: 49%
  • South Africa: 28%
  • Colombia: 19%
  • India: 6%

Credit cards (50%) were the most common financial product held by Gen Z, ahead of student loans (39%), auto loans (25%) and unsecured personal loans (4%).

While half of U.S. credit-active Gen Z consumers have credit cards, that pales in comparison to those located in Canada (99.8%) and Hong Kong (91%). The high adoption rate in those markets can be attributed to the prevalence of credit in day-to-day life, Komos explains. See below for a break down of credit cardholders by region:

  • United States: 50%
  • Canada: 99.8%
  • Hong Kong: 91%
  • Colombia: 32%
  • India: 11%
  • South Africa: 5%

In the U.S., Gen Z credit cardholders have an average of 1.5 credit cards, which is lower than the average American's four credit cards. The median credit card balance is $606 and cardholders have roughly a 31% utilization rate (the total amount of credit you're using compared to your total credit limit). This is in line with the recommended 30% utilization rate and in general, the lower, the better.

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For rates and fees of the Amex EveryDay® Credit Card, click here.

Information about the Amex EveryDay® Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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