Younger Australians are turning away from credit cards, with many considering them to be financially dangerous, according to a new report.
Financial stress is the main driving factor for Gen Zs born between 1996 and 2005 shunning the payment method, according to a survey of 20,000 people worldwide, including more than 4300 Australians.
The study by buy now, pay later platform Afterpay found that while at least four-in-five Australians create budgets to manage their shopping expenses, three-quarters find it difficult to stick to them.
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When it comes to unexpected bills, almost 38 per cent have less than $800 saved up to cover an emergency expense.
More than three-quarters of Gen Z said credit card bills make them feel anxious or stressed due to high interest rates and difficulty understanding credit card terms.
Mounting debt is also a challenge with more than one-in-five surveyed Gen Zs owing $8000 or more in credit card debt.
Debit cards are the most common form of payment for Gen Z; 75 per cent use them, followed by cash and bank transfers.
Credit cards were the least-used payment method for younger shoppers.
The report found that 53 per cent of all Australians are open to using buy now, pay later services in the future.
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The buy now, pay later industry is facing tougher regulations this year after the Australian Securities and Investments Commission (ASIC) proposed modifications to the Credit Act.
Under the law, providers will need to apply for an Australian credit licence, be accepted by the Australian Securities and Investments Commission (ASIC) and become a member of the Australian Financial Complaints Authority.
Millennial and Gen Z Australians are likely to be disproportionately affected, as they make up the majority of buy now, pay later customers.
The federal government’s Money Smart website offers information on budget planning, retirement calculators and credit services.
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