How Credit Card Issuers Pursue the Wary Millennial

Just as the black-footed ferret or snow leopard tends to remain hidden from wildlife seekers, millennials have proved elusive targets for credit card issuers eager to attract them.

A recent report by Aite Group, a financial services industry research company, found that almost half of millennials (defined in the report as those born between 1981 and 2000) carry just one rewards credit card. On the other hand, 40% of seniors (born before 1946) have three or more cards, as do 27% of Gen Xers (born between 1965 and 1980). Similarly, less than half of millennials say they use their card at least once a week. In contrast, 61% of seniors do so.

Buyer’s remorse might have something to do with those figures. According to a NerdWallet study earlier this year, millennials (in the study, ages 18 to 34) were the most likely generation to say that they regret their credit card debt, with 91% of millennial respondents saying so, compared with 81% of baby boomers (ages 55 and up).

Another reason might simply be a marketplace that offers more choice.

“Millennials are more experienced in other payment forms,” says Todd Nelson, senior vice president of strategic partnerships at LightStream, an online lender. “Credit cards are used less by them than by previous generations simply because of the choices that they have.” He adds that other digital payment methods can make it easy for millennials to skip credit cards altogether.

To stand out, credit card issuers are offering what they consider to be millennial-friendly enticements. Many of these perks can help consumers stretch their budgets, as long as cardholders avoid overspending and debt along the way. Here are some issuers’ recent strategies.

Offering value that’s easy to access

Millennials are often highly budget-conscious, says Kevin Morrison, senior analyst on the retail banking and payments team at Aite Group; this may be partly because of their life stage. They tend to have fewer accumulated assets and lower incomes than Gen Xers, for example, so many need to stretch their dollars whenever possible.

Credit cards that offer rewards with no annual fees can be ideal for that — but only if those rewards are easy to earn and redeem. “Millennials tend to be very value-based. They tend to redeem as they go, and ease of redemption drives higher redemption rates,” Morrison says.

When it comes to simplicity, there are plenty of existing options, such as the Citi Double Cash® Card, which offers 1% back on all purchases and 1% back when you pay them off. But newer cards have also hit the market, including the PayPal Cashback Mastercard®, which offers 2% cash back on all purchases. Cash is redeemed directly to cardholders’ PayPal accounts, so it has the broadest appeal to existing PayPal users. And many of them are millennials: 8 million users are between ages 25 and 34, more than in any other age group, according to Verto Analytics, a market research firm. An additional 4.5 million are between 18 and 24.

Providing unique experiences

Concert tickets can be a big splurge for young people; the kind of exclusive access offered by many credit cards is an even bigger luxury.

For instance, American Express in 2018 partnered with Coachella — the popular music and arts festival in April in Indio, California — to offer eligible cardholders perks like access to an Uber priority lane and a complimentary Ferris wheel ride. Those who had The Platinum Card® from American Express could get access to makeup and hair services and complimentary food and beverages.

AmEx has been gaining the attention of millennials with these kinds of offerings. NerdWallet recently reported that millennials opened 36% of AmEx’s new accounts last year.

Partnering with retailers millennials already love

Card issuers are taking notice of millennials’ shopping habits and partnering with certain retailers to offer extra perks or new co-branded cards.

Take coffee, for example. According to the National Coffee Association, 32% of millennials (defined in the study as between ages 19 and 34) drank an espresso-based drink yesterday, more than any other demographic. It’s possible the new Starbucks Rewards™ Visa® Card — which offers rewards in the form of free drinks and food — might appeal to these espresso enthusiasts.

Or consider the fitness category. GlobalWebIndex, a research marketing firm, reported in 2017 that 76% of millennials (defined as ages 21 to 34) exercise at least once a week, which is more than any other age group. Perhaps these are the kinds of spenders who might be interested in a SoulCycle promotion offered by The Platinum Card® from American Express, which included three free classes when you purchased a series of 20. (UPDATE: The SoulCycle promotion has expired.)

GlobalWebIndex also reported that the majority of Uber users were under age 34. Are they potential candidates for the new Uber Visa credit card from Barclays? It offers 4 points per dollar spent on dining, 3 points per dollar on hotels and airfare, 2 points per dollar on online purchases (including Uber), and 1 point per dollar on everything else.

It’s unclear whether these new cards and promotions will gain traction among millennials — but issuers are certainly trying.

The takeaway for millennials? Keep making credit card issuers work hard to win your business. The value you get out of the card is the most important calculation for your budget. Use a credit card only when it’s giving you more — in the form of rewards, cash back or other perks — than you’re giving it.