Opinion: Gen Z’s Credit Risk Isn’t Recklessness. It’s Costs

Adults between the ages of 18 and 29 are not just trying to make ends meet but are eager to establish a stable life. The economy, though, is making their dreams feel increasingly unrealistic. 

New research from Bank of America found that Gen Zers tend to be financially serious and disciplined.

According to its May 2026 Better Money Habits study, an astonishing 81% of surveyed Gen Zers said it’s important to be perceived as financially responsible, and almost 70% said they have taken steps to manage rising costs over the past year. The cost of living is keeping them from achieving their goal of becoming financially stable. 

This is essential information for both consumers and lenders. These are not minor challenges. Younger Americans are motivated and working hard, but they lack the financial margin to absorb normal and out-of-the-ordinary life shocks. 

And many are precariously close to being in the subprime category — if they’re not already there. 

Stability Versus Status

Gen Z consumers may have a reputation for being impulse spenders, but the Bank of America study found the opposite. Many are actively slashing discretionary spending while they change social habits to set cash aside. 

Will Smayda, head of Financial Centers at Bank of America, told me the research findings reflect a generation that is trying to move forward responsibly, despite being under inflationary pressures. 

“The high cost of living is a major stressor for 63%, and 42% say they’re living paycheck to paycheck, but they’re not giving up,” Smayda said. “Two-thirds are actively saving, and three-quarters are finding ways to spend less when making social plans.”

Encouraging, yes, but it also shows how financial strain has become a way of life for young consumers. Rather than expecting a rapid rise in economic mobility, they seem to be adapting to reduced purchasing power. 

Open Money Conversations Are Helping 

But this demographic isn’t staying silent about their money issues.

Loud budgeting — as the popular strategy of being transparent about your financial goals — isn’t just a TikTok trend. The study found that 42% of surveyed Gen Zers are practicing this fine art of financial communication. They are turning to others in their quest to survive and learning how to cut back on nonessentials. 

Such open budgeting has a myriad of benefits. Transparency about financial struggles leads to less shame and more information from people who are navigating the same hardships. 

There’s also something freeing about being able to say, “I can’t afford to go out to dinner tonight, let’s do something less expensive” without fear of being judged. As someone who has been in this business for decades, this is a refreshing change. 

Subprime Issues Magnify With Increasing Costs 

In general, younger adults have lower credit scores because they haven’t had the time to create high credit scores. Many are either at or close to the subprime category. 

FICO reports that the average score among all borrowers is 714, but Gen Z consumers have significantly lower average scores at 676. This is a precarious place for them to be.

Since FICO scores below 670 fall below the good-credit range, one missed payment or account that has a revolving balance at or close to the credit limit can bring down their scores to subprime levels in a single billing period. 

So why would this generation be so at risk of credit damage while they are doing the right things to make ends meet and get ahead? We must return to the rising cost of living. Even one expense that escalates dramatically can throw a tight budget off. 

“Lenders want to see steady, responsible credit use over time.” — Will Smayda, Bank of America

For example, the recent gas price surge has had a serious impact. Data from AAA show the current national average price per gallon is $3.92, compared with about $3.23 a year earlier. At the current price, filling a 14-gallon tank costs $54.88. For two fill-ups a week, that’s about $439 every four weeks, or roughly $475 in an average month.

For someone with an entry level job, just getting from point A to point B can cause a tremendous amount of stress. 

The Lenders’ Remedy

For Gen Z to avoid entering (or getting deeper into) subprime territory, Smayda encourages them to treat credit cards as financial tools. When used right, they can be part of the solution. 

His sound advice: Spend only what you can comfortably afford to repay quickly, make payments on time and try to keep revolving balances below 30% of a card’s credit limit. And, when seeking a new account, avoid opening too many credit cards at once. 

“Lenders want to see steady, responsible credit use over time,” he said. “Building strong credit doesn’t happen overnight, but consistent habits can make a major difference in the long run.”

Offering helpful credit products to this demographic, despite their relative low scores, is another part of the solution. If the research is correct, Gen Zers are into this thing called responsibility. 

Can a gas card help during this time of rising fuel costs? Maybe. And are there benefits to using a cash back credit card, loyalty programs and partnerships that offer discounts, and a great app for money management and budgeting?

The signs say yes. But anything that gives them the opportunity to actually get ahead will be most appreciated.