Gen-Xers more likely to rely on credit cards for essentials like groceries than any other generation. Here’s why

Gen-Xers — those between 43 and 58 — increasingly rely on credit cards to pay for essentials such as groceries and utilities, according to a recent study conducted by a personal finance company.

The survey by NerdWallet found of 1,000 Canadian adults that 76 per cent of gen-Xers have used a credit card to pay for purchases like groceries and utilities over the past year compared to 74 per cent of baby boomers and 68 per cent of millennials.

Nearly half of the total respondents in the April 2023 survey said their credit card habits had also changed in the past year in large part due to rising prices for goods and services.

“Inflation is a major factor for these shifting credit card habits,” said NerdWallet spokesperson Shannon Terrell.

However, not everyone is relying more on credit to get them through tough times.

Only 53 per cent of generation Z (aged 18-26), said they used their credit card for essential expenses. In fact, gen Zers are much more likely to have a “debit-first” mindset to spending.

An Interac survey from April this year found 70 per cent of gen-Zers said they frequently use debit, compared with 55 per cent of older participants.

Part of the reason for this is that younger people today have much less access to credit, according to Doug Hoyes, licensed insolvency trustee and co-founder of debt relief firm Hoyes Michalos.

“(Gen X) has had access to credit for their entire adult life because they grew up in a time when everything was good, it was easy to borrow,” Hoyes said. “Eighteen, 20, 25-year-olds — they’ve never had the same access to credit.”

He cites recessionary pressures, increasing costs of tuition and student loans, and an out-of-reach housing market as reasons why gen-Z hasn’t been able to build the same level of borrowing power.

“If (a Gen-zer) goes to the bank and asks: ‘Can you give me a credit card with a $50,000 limit?’ they’ll laugh at you,” he said.

Terrell said the generational differences in spending habits may also be because they’re in different stages of life.

For instance, younger people may be living at home or are either partially or fully supported by family members for the costs of covering essentials. “Members of older generational cohorts may be more likely to have family members that are financially dependent on them,” Terrell said. “This may expand the financial burden of essential costs, which might result in increased reliance on credit to cover them.”

For instance, 16 per cent of gen-Xers in the NerdWallet survey reported their credit card habits changing because mortgage payments or rent required more of their income each month.

Anne Arbour, director of strategic partnerships at the Credit Counselling Society, said one of the top reasons clients are seeking counselling is because “they are overusing credit for their day-to-day expenses.”

“People are stretched,” Arbour said, noting that the average level of credit card debt has been growing over the last six to 12 months. “They don’t have enough cash in their wallet to meet their day-to-day living expenses, and they are putting it on credit without a plan for paying it off. They’re just using it to get by, to bridge the gap.”

Hoyes said that ultimately, it doesn’t matter what kinds of costs you put on your credit card — as long as you can pay it back.

“A credit card should be a substitute for cash, not a way to borrow,” he said. “You’re playing with fire if the money isn’t there because that’s what gets you into the trap of not being able to pay it off, and then you end up incurring interest.”