smiling girl holding payment card

Voice of Generation Z: Learning to Embrace Credit Cards

By: Olivia Anderson, Intern, Marketing, PSCU

The eldest of Generation Z are now between the ages of 18 and 24. As they have become adults, finances have become more of a reality and concern. With new innovations constantly being introduced, Gen Z has begun exploring different platforms and options for saving, investing and making transactions. Still, credit cards remain a popular payment option that Generation Z is learning to embrace. While credit cards offer benefits like rewards, convenience and a level of security not guaranteed with other payment options, they also mean monthly payments, interest rates and credit scores – which could be an entirely new undertaking for young adults just learning to become financially independent from their parents. This presents the opportunity for financial institutions to educate Gen Z on more responsible and frequent credit card use.

Who Is Influencing Generation Z to Get Credit Cards

Just over a decade ago, college freshmen walking onto a campus would be greeted by tables of FIs offering credit cards. With no co-sign necessary, these inexperienced young adults were handed credit cards, not knowing the effects of using them irresponsibly. This led to the Credit Card Act of 2009, which limits FIs’ ability to market to young adults under the age of 21. Now, credit cards issued to young adults must be guaranteed by a co-signer over 21 years-old, allowing parents to be more involved in the process and giving Gen Z a better opportunity to learn to use credit responsibly and start building a positive credit history. This also requires financial institutions’ focuses to shift from selling the benefits of credit cards to young adults to selling the benefits to parents. So credit unions must ask, what do parents want for their children in a credit card? My parents, for instance, are most interested in low interest rates – just in case I were to ever fall behind. But every parent has different perspectives and preferences, which will possibly shape how their children treat this payment option.

Credit Building is the Main Motivation

It is a well-known fact, including among Gen Z, that credit card usage is one of the easiest ways to build your credit history. Amongst my friends, the number-one reason for owning a credit card was to start building credit for larger purchases in the future. This alone motivates young cardholders to choose a credit card issuer wisely and to be responsible while using it. Using the credit card allows them to gain experience making monthly payments on time and checking their credit score. Credit unions can contribute to Gen Z’s success in building credit by encouraging them to consistently check their credit card balance and providing education on how to treat their credit cards like a debit card, to ensure they can make full monthly payments on time.

Credit Cards are for Small Purchases

Because credit cards are a credit-building tool for much of Gen Z, many are not ready to start maxing out their cards on expensive purchases. Credit card spending is most often limited to small, inexpensive purchases such as household items, gas, groceries and other immediate needs. Also, those who appreciate the security credit cards offer prefer to use credit cards for online shopping. Credit unions could encourage this responsible behavior by offering credit card rewards specifically for these smaller purchases. When asked which features were most important in a credit card, 80% of my friends chose rewards. Offering rewards will persuade young cardholders to keep spending small, ensuring they can pay off the cards at the end of each month.

Debunking the Credit Card Myths

Unsurprisingly, not all of Gen Z is willing to fully embrace credit cards and their benefits yet. Many who are hesitant don’t feel that they know enough about credit cards to start signing on to them. Sad to say, credit card education is not a typical course taught in high schools. There are also members of Gen Z who feel that they are knowledgeable about credit cards, yet they have many misconceptions. Most commonly, credit cards are associated with debt, especially those that have seen parents or other adults in heavy credit card debt. Therefore, credit card education and resources can’t just be targeted to existing cardholders. No one is ever too young to get a foundation in financial education – credit unions looking to attract younger members must begin interacting with all ages within Gen Z. Credit unions should be thought leaders, providing young people with the resources they need to be financially knowledgeable and prepared for adulthood.

How Generation Z Will Affect Your Credit Union

Generation Z will not stay young forever. Their needs will only get larger and more expensive as they begin purchasing cars and homes and become spouses and parents. Their credit needs will also potentially grow from credit cards for small purchases to student loans, auto loans and mortgages. Young members’ experiences with their first credit card will likely determine their loyalty and shape their perceptions of the lending credit union for future needs, as well. With so many alternatives in the market – both brick-and-mortar and digital – this loyalty must be won at the earliest interaction. Gen Z expects a certain level of respect, control and security. Credit unions providing these needs in their interactions with new cardholders will prove to create lasting relationships with their youngest members.

Generation Z’s perceptions of and loyalties toward brands often lead them to share their experiences with others, whether they are close to them or not. As social media outlets have given users wider audiences to reach, much of Gen Z consider themselves to be influencers, especially in their friend groups. Providing the best initial experience with a credit card will only encourage young members to share their experiences and influence their networks to explore a relationship with your credit union.

Olivia Anderson is interning this summer with PSCU’s Marketing Department to develop applicable marketing skills and to gain a deeper understanding of how marketing affects all business units. Olivia is a rising senior at the University of South Florida, pursuing her undergraduate degree in Marketing. She enjoys combining her business knowledge and creativity to help small businesses in her community grow through marketing strategies.