Swipe Now, Pay Later: The Impact of Credit Card Spending on the Financial Life of Gen-Z


The group of individuals who are born between the year 1997 to 2012 are considered to be the generation of Gen Z. They are now becoming more responsible towards their life and are entering the workforce and becoming financially independent. In this age, they learn various aspects of managing their own finance including the use of credit cards for  spending. A credit card is an easy and efficient tool for an individual to manage his spending if used wisely, otherwise it can have worse effect as well.

According to the latest figures released by the Reserve Bank of India (RBI), credit card spending in December 2022 reached Rs 1,260 billion, up 10.21% from November. Also, on a year-on-year (YoY) basis, spending increased by 34.31% during the period. The figures mentioned signify that the credit card spending has sharply increased.

Let us look at its impact: Both positive and negative.

Positive Impact of Credit Card Spending:

Readily available credit: The primary benefit of a credit card is the ability to easily access credit. Its main feature is that you can use a credit card now and pay for your purchases later since credit cards operate on a deferred payment basis. Every time you swipe, no money is taken out of your account, thus your bank balance is not diminished, immediately.

Building credit: The second most significant impact of credit card spending is building credit scores. Use of credit cards and payment history are key aspects. Future loans and better interest rates can be obtained by Gen-Zers with a high credit score. This could be beneficial of them when they want to borrow money to purchase home or car or such large assets. . If the credit card is wisely used, it would be helpful in maintaining a healthy financial status.

Reward points, discounts and cash back: The other major attraction is the incentives and offers which these generation would love to enjoy which comes with lot of ecstasy. Mostly all credit cards have ample of rewards and perks such as points, cashbacks, discounts for spending. These benefits can be compensated for future bills. It also helps you to save a large amount of sum as it offers exciting discounts on purchases done by paying through a credit card.

EMI Option: If you are looking for a purchase of an electronics, home appliance or you are going for a travel, but don’t want to dilute all your savings in one go, credit card comes with an affordable EMI option which would be right tool for you. You can pay in bits and pieces over a long period of time.

Transaction Report: All the transactions done through the credit card gets recorded.  This information will appear on your credit card statement. A complete snapshot of your spending on your credit card will help you manage your finances in an efficient manner and better build your monthly budget.

Negative Impact of Credit Card Spending:

High-interest rates: Credit cards often have high interest rates, and if you don’t pay them off in a timely manner, you will end up with huge debts which can cause a lot of stress and mental strain. It would in turn negatively impact your financial stability, so it is always recommended to pay off the bills in a stipulated manner to avoid high interest rates. 

Spend Extravagantly: Due to the convenience ,people often tend to overuse the credit card, severely affecting an individual’s financial situation. At times, we end up purchasing things that are not necessary. Overspending through the use of credit cards should be avoided at all costs to live a financially healthy life.

Fraud and identity theft: Malpractices are increasing by each passing day. Though credit cards are considered as one of the safest financial instruments, but they may expose one to online frauds. Scammers can steal your information and misuse it. It is the responsibility of the cardholder to use credit card carefully. In case of a fraud, one must  report to the bank within three days.

Unwanted Costs: Though the credit card comes with innumerable perks, there are unwanted and hidden costs associated with it, which are often ignored by number of card holders which in turn increases their overall expenses.  If the card holder doesn’t make a timely payment, or if the card is misplaced, a penalty will be charged. Such delays also negatively impact the individual’s credit score. Also, there could be many charges in the form of late payment fees, joining fees, processing fees and other.

Credit card has both advantages and disadvantages, just like two sides of a coin.  Credit card use could have a big impact on Gen Z’s lives so it is always advisable to use credit card wisely to avoid unwanted expenses.



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