Across all generations, credit card debt is the most common type of consumer debt. With the rise of digital and mobile payment solutions, such as Apple Pay, Google Pay and Amazon Pay, and the overall increased ease of online transactions, personal credit cards are the preferred form of payment among Baby Boomers, Gen X and Millennials. But the credit card marketplace is competitive, which means credit card marketers must understand how different audiences are attracted to, motivated by and use credit cards. 

Why Consumers Are Attracted To Credit Cards

According to business.org, even though cash is the most trusted form of payment, personal credit cards are considered the most convenient method of payment by consumers. In 2018, personal credit cards were the preferred payment method among consumers. Although the popularity of credit cards applies across all consumer generations, different segments have different motivations for preferring to use personal credit cards in transactions. 62.3% of Baby Boomers surveyed by Ascent claimed their main motivation for opening personal credit cards was the convenience of not having to carry large amounts of cash, while 71.9% of Millennials claimed they opened credit card accounts to build their credit histories. 

Personal Credit Card Use By Generation

Revolving Debt: Baby Boomers and Gen Xers carry the highest amount of revolving credit card debt, averaging $6,800 for Baby Boomers and $6,600 for Gen X compared to just $5,500 for Millennials. 

A few factors may be contributing to lower resolving debt among Millennials. Younger Millennials are now in their mid-twenties, their credit histories are still relatively new, and therefore, they have not likely been allotted high credit limits. Older Millennials, however, likely have lower revolving debt as a result of conditions relating to the Great Recession. Older Millennials are still recovering from a tough job market and stagnant wages which they endured from 2007 to 2009. During the Great Recession, high unemployment rates, and the elimination of many entry-level positions paired with unfavorable debt-to-income ratios as a result of student debt and limited income created a tight credit environment for many older Millennials who were starting to establish credit profiles at the time. 

Credit Limits: Compared to all generational groups, Baby Boomers are least likely to have maxed out their credit cards. Gen Xers overall have the highest credit limits and are considered to be in their peak buying years. 

New Credit Lines: Millennials and Gen Xers represent the generational segments most likely to open new personal credit cards in the next 12 months. 

New Credit Account Holders: Among Gen Z consumers who are eligible for credit cards, 41% had personal credit cards in 2019, according to American Banker. 50% of Gen Zers who have personal credit cards have credit scores of 660 or higher. 

Credit Card Rewards Attract Millennials And Gen X

Since the 1980s, credit card companies have been offering a variety of rewards and user incentives for credit card holders because, according to Business Insider, for 75% of credit card holders their preferred personal credit cards offer rewards incentives. Each generation, however, is motivated by rewards differently. 58% of Millennials and 62% of Gen Xers prefer credit cards that offer cash-back rewards to account holders. 

COVID-19 Credit Card Use And Support From Credit Card Brands

Amidst recent societal shifts, such as social distancing, remote work and stay-at-home measures as a result of COVID-19, consumers of all ages are altering their spending habits. With an increased focus on contactless transactions, consumers are expected to increase their use of electronic payments, including personal credit cards, for their most essential purchases. 

Brands such as American Express, Chase and Capital One have already publicly announced a series of assistance-oriented options they intend to offer to their card holders, including waiving late fees, temporarily lowering monthly interest rates and deferring payments without incurring additional penalties. Barclays, Citi Bank and Synchrony have also publicized their offers to increase credit lines and make credit more available for account holders who need access to money for basic necessities. Even though the new credit card deferred payment offers are available on a case-by-case basis, these major credit card companies have all acknowledged that, in order to maintain positive relationships with their customers, it is essential to offer support to those facing financial hardships. 

Credit card loyalty in 2020 may not be based on perks and privileges offered with credit card incentives, but rather the flexibility and financial leniency allowed during times of crisis which could help keep card holders afloat. The companies that offer relief during difficult times may have the highest propensity to maintain customer loyalty in the future. 

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