A recent report highlights a significant trend among younger Australians, particularly those from Generation Z, who are increasingly distancing themselves from credit cards due to perceived financial risks. The study, conducted by Afterpay and involving 20,000 participants globally, including over 4,300 Australians born between 1996 and 2005, identifies financial stress as a primary contributor to this shift in attitude.
The findings indicate that while a substantial majority (80%) of Australians make budgets to manage their spending, three-quarters struggle to adhere to these financial plans. Alarmingly, nearly 38% of Gen Z respondents reported having less than $800 set aside for unexpected expenses, further indicating the precarious financial situations many face.
An overwhelming 75% of surveyed Gen Z individuals expressed feelings of anxiety associated with credit card bills, largely due to high interest rates and the complexities of credit card terms. Additionally, over 20% of respondents indicated they were burdened with credit card debts exceeding $8000, showcasing the financial challenges linked to this payment method.
In contrast to credit cards, debit cards have emerged as the preferred payment option for 75% of Gen Z, followed by cash and direct bank transfers. Consequently, credit cards are now the least favoured method of payment among younger consumers.
The report also reveals that more than half (53%) of Australians are open to the idea of using buy now, pay later services in the future. These services offer an alternative approach to traditional credit and are particularly relevant to younger generations who often prefer to avoid accumulating credit card debt.
As credit card regulations tighten, providers will be mandated to acquire an Australian credit licence and comply with various standards set by the Australian Securities and Investments Commission (ASIC). This regulatory environment may disproportionately affect younger Australians, who constitute a significant portion of buy now, pay later users.
For those seeking financial guidance, the federal government’s Money Smart website provides valuable resources for budget planning and offers insights into credit services, equipping users with the necessary tools to manage their finances more effectively.