Young adults often develop credit card debt early in independence

On Behalf of | Sep 16, 2021 | Credit Card Debt

Moving out of a childhood home is one of the first major steps toward adulthood. However, it has become increasingly expensive to do. The cost of living independently often forces young adults into significant credit card debt.

Although historically older adults with children were historically the ones with crippling levels of credit card debt, new research shows this trend has changed in recent years. Millennials may have over $27,000 in personal debt, while members of Gen Z just starting out in life may have close to $11,000 worth of personal debt.

Neither of those figures includes any mortgage debt. High levels of debt mean that young adults and those starting new families are at a financial disadvantage and may struggle just to balance their budgets.

Young adults often don’t understand the dangers of credit cards

The modern schooling system does little to prepare students for the financial realities of independent life. Although they may have some basic education about credit and finance, most young adults will struggle to apply that theory to their daily lived experience.

They may assume that it’s okay to carry a balance on a credit card this month because they’ll pay it off once their income goes up. However, as the balances keep climbing, the possibility of paying that debt in full decreases.

Credit card debt could affect someone’s ability to qualify for a mortgage or even qualify to rent a nice apartment. Credit cards are often the beginning of financial difficulty that can prevent young adults from achieving true financial independence.

Overwhelming debt early in life can be an important lesson

Someone in their early 20s with five figures worth of credit card debt may not be in a position to realistically repay that debt and regain control over their monthly budget. Especially when there is no reason to expect a drastic shift in income in the next few years, bankruptcy may be the best option for those with high levels of personal debt.

Filing for bankruptcy as a young adult may feel like a particularly humiliating lesson, but at least that means that the bankruptcy records will come off of someone’s credit report by the time they are ready to start a family and buy a house.

Learning more about how credit card debt limits your financial options may help you make more realistic choices about your financial future.