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The deteriorating credit habits of Generation Y - 18 to 28-year-olds - has resulted in a 15 per cent rise since 2003 in those not paying their credit card bill, a new report reveals.
But Generation X - aged 28 to 43 - still leads in not paying the bills.
Figures from New Zealand's largest credit information provider, Veda Advantage, also show that total defaults are up 11 per cent from the March quarter last year.
Phone and internet services had the sharpest increase, up 148 per cent and 100 per cent respectively.
The percentages reflect thousands of people not paying their bills, but Veda Advantage refused to give specific figures, saying they were commercially sensitive.
Veda Advantage director John Roberts said the study highlighted the changing trends among generations.
While those in Generation X were still the worst non-payers, accounting for 37 per cent of those who didn't pay bills and leading credit card and hire purchases default figures, that wasn't the most worrying feature.
The increase in Generation Y defaulters was caused by a lack of financial literacy.
And Gen X's rate of defaulting had fallen from 52 per cent to 40 per cent, narrowing the gap between the two.
Mr Roberts said baby boomers had been "well behaved", most likely because they'd lived through a previous downturn.
The report showed that Gen Y was also the most credit-hungry age group, particularly in applications for credit cards.
This suggested that the increasing default trend was likely to continue.
Flatting situations where people failed to sort out bill payments, or individuals moving from contract to pre-pay without paying for the initial service were likely to be contributing factors.
What younger defaulters might not realise was that defaults stayed on a person's credit record for five years and could affect borrowers' ability to get quality loans at competitive rates.
"That could be for a $30 default," Mr Roberts said.
It was clear that many debtors were "financially stressed" and more defaults were expected as the cost of living increased over winter.
Rising mortgage interest rates, the high price of fuel and rising food prices meant household expenses were likely to be up more than $1000 a month from 2006.
"The rise in defaults is an unfortunate economic indicator at the moment," Mr Roberts said.
"Fewer people are applying for credit, and more are struggling to meet basic financial obligations.
"Bills for things like phone and internet are deemed less essential, so they are one of the first expenses to be ignored."
Associated Budgeting Consultants Network chairman Darryl Evans said he wasn't surprised at any of the report's findings.
But it did show that Generation Y was not learning much from its elders.
"I believe that living in debt is learned behaviour," he said.
"At the moment I'm working with four generations of the same family. That says something."
The future was worrying if money management didn't form a core part of every young person's education, Mr Evans said.
"What we're seeing is a huge number of students, who have left home and never paid a bill in their life. All of a sudden they're struggling to put food on the table."
A Telecom spokesperson said the company's absolute level of bad debt has not risen, but it had noticed early warning signs that indicated tighter economic conditions for customers overall.
