Study: Generational Credit Card Habits
KEY POINTS
- GENERATIONAL PREFERENCES: Baby boomers prioritize no annual fee in credit cards, whereas Gen Z and millennials value low interest rates more.
- DEAL BREAKERS IDENTIFIED: An annual fee is the top disqualifying feature for baby boomers, while high interest rates deter Gen Z and millennials.
- CREDIT BUILDING VS. REWARDS: Younger generations seek credit cards to build credit, while baby boomers focus on maximizing rewards.
What consumers are looking for out of their credit card goes a long way in determining what kind of cards they hold in their wallets -- and different generations have different needs from their cards.
The Motley Fool Ascent surveyed 2,000 Americans on their credit card habits and preferences and found several differences among generations as well as some similarities.
For example, respondents from younger generations place more value on a card with a low interest rate than no annual fees, while baby boomers are more likely to consider no annual fees as the most important credit card feature.
Baby boomer respondents are also less likely to look for a new card in a bid to build their credit score. Instead, their top priority is to optimize rewards. For younger generations, rewards take a back seat to building credit when they're shopping for a new credit card.
For a deep dive into generational credit card habits, read on.
Baby boomers split with Gen Z, millennials on most important credit card features
The most important credit card feature for baby boomer respondents is no annual fee while Gen Z, millennials, and Gen X slightly prefer cards with low interest rates. Across all generations, no annual fees and low interest rates are the top two most important features a credit card can have.
Respondents from younger generations are also more likely to say a higher credit limit is their top priority than baby boomers.
| What is the top feature you look for in a credit card? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| No annual fees | 29% | 19% | 30% | 45% | 31% |
| Low interest rate | 30% | 28% | 31% | 25% | 28% |
| Rewards program | 11% | 14% | 17% | 11% | 14% |
| High credit limit | 15% | 19% | 10% | 5% | 12% |
| Introductory offer/welcome bonus | 2% | 6% | 5% | 4% | 4% |
| Recognized/reputable card issuer | 3% | 4% | 2% | 7% | 4% |
| Widely accepted card issuer | 6% | 5% | 2% | 2% | 4% |
| Insurance or other protections offered through the card | 4% | 4% | 2% | 1% | 3% |
Those preferences track with features that are deal breakers when shopping for a new credit card.
For 46% of baby boomer respondents, an annual fee disqualifies a card from their consideration. The top disqualifier for Gen Z and millennial respondents is a high interest rate. Again, the two most frequently cited credit card deal breakers across all generations is an annual fee and a high interest rate.
| What immediately disqualifies a credit card from your consideration? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| An annual fee | 25% | 26% | 36% | 46% | 34% |
| High interest rate | 35% | 39% | 29% | 30% | 33% |
| Requirement for a high credit score | 22% | 22% | 18% | 9% | 17% |
| Non-competitive rewards/cash back program | 7% | 7% | 9% | 10% | 9% |
| No or non-competitive introductory offer | 11% | 5% | 8% | 4% | 7% |
This may suggest that baby boomers are more confident in their ability to pay off their credit card every month and view an annual fee as the main cost associated with using a credit card.
It's surprising that Gen X respondents don't consider interest rates to be a higher priority given that they carry over $2,000 more in credit card debt on average than any other generation.
No annual fee cards may also be easier for baby boomers to obtain. The best no annual fee credit cards usually require a good credit score, and the average credit score for baby boomers is well above that.
The best low interest credit cards may be a better fit for some younger generations who are not in their prime earning years and anticipate putting purchases on their card they cannot pay off in a single billing cycle.
Younger generations look for new credit cards to build credit, while baby boomers look for rewards
The most cited reason Gen Z, millennials, and Gen X respondents looked for their last new credit card was to build their credit, while the most popular motivation cited among baby boomers was to earn more points or optimize rewards.
| What prompted you to search for your last new credit card? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| To build credit | 48% | 42% | 36% | 19% | 36% |
| To have more available credit | 14% | 16% | 17% | 23% | 18% |
| To earn more cash back/points | 15% | 16% | 12% | 16% | 15% |
| To optimize rewards | 7% | 10% | 11% | 15% | 11% |
| To take advantage of a sign up bonus | 7% | 6% | 11% | 11% | 9% |
| To take advantage of a 0% APR intro offer | 4% | 5% | 8% | 12% | 7% |
| To transfer an existing credit card balance | 5% | 4% | 5% | 5% | 5% |
When combining the different points, rewards, and cash back related reasons, those motivations became the second-most cited cause among Gen Z, millennials, and Gen X respondents for the last credit card search and the most-cited among baby boomers.
Here are the percentages of each generation that cited a reason dealing with rewards or cash back as their primary motivator:
- Gen Z: 29%
- Millennials: 33%
- Gen X: 34%
- Baby boomers: 41%
- All respondents: 35%
On average, younger generations have lower credit scores than older generations, which tracks with younger respondents being more likely to cite the desire to build their credit history as the reason for their most recent credit card search.
Having a credit card with a healthy credit utilization ratio and making payments on time are important factors credit bureaus consider when calculating credit scores. That said, younger generations should be wary of opening multiple credit cards at once. Applying for a new credit card often comes with a hard credit check, which can decrease your credit score.
Cash back cards are the most popular type of credit card across generations
Cash back credit cards are the most popular cards among respondents to the Motley Fool Ascent's survey, with over 50% of each generation claiming to have at least one.
Rewards cards are a close second, held by 49% of respondents, although 52% of millennials, Gen X, and baby boomers say they have a rewards card compared to 38% of Gen Z.
| What types of credit cards do you have? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| Cash back credit card | 53% | 56% | 55% | 59% | 56% |
| Rewards credit card | 38% | 52% | 52% | 52% | 49% |
| Store credit card | 18% | 22% | 23% | 25% | 22% |
| Secured credit card | 21% | 29% | 21% | 16% | 22% |
| Travel credit card | 13% | 20% | 14% | 15% | 16% |
| Business credit card | 15% | 23% | 14% | 7% | 15% |
| Cobranded credit card | 8% | 10% | 9% | 15% | 10% |
| Student credit card | 25% | 6% | 4% | –% | 9% |
The popularity of cash back cards may lie in their variety. Some of the best cash back credit cards offer a flat percentage back for all purchases while others feature more cash back for specific types of purchases.
Baby boomers use their credit cards for more spending than other generations
Among survey respondents, baby boomers put 30% of their spending on average per month on their credit cards, while Gen X used their credit cards for 22%, millennials for 20%, and Gen Z for just 14%.
| What percentage of the purchases you make in an average month is placed on a credit card? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| 50% or less | 86% | 80% | 78% | 70% | 77% |
| Over 50% | 14% | 20% | 22% | 30% | 23% |
Data from Experian tracks with those findings: Gen Z and millennials carry lower credit card balances than Gen X and baby boomers, although it does show that Gen Xers on average carry more on their credit cards than baby boomers. Still, Gen X spends more than any other generation, so they may carry a higher credit card balance while putting a lower percentage of their spending on their credit cards.
Statistics from Experian also suggest that younger generations also have lower credit limits due to their short credit history, which could influence how much of their overall spending they put on their credit cards.
Millennials are more likely than other generations to track credit card spending
Eighty-two percent of millennial respondents claim to track their credit card use throughout the month, more than any other generation. That said, over 70% of respondents in each generation said they tracked how they were using their credit card over the course of each month.
| Do you track your credit card spending/credit usage throughout the month? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| Yes | 78% | 82% | 72% | 76% | 76% |
| No | 22% | 18% | 28% | 24% | 24% |
Tracking credit card spending is important even if you know you can cover your credit limit at the end of your billing cycle. Credit bureaus can lower your credit score if you carry a high credit utilization ratio, which is the credit card balance divided by credit limit. Keeping your credit utilization ratio below 30% is generally recommended.
15% of respondents pay off their entire credit card balance each month
Fewer than 20% of respondents in each generation opt to pay their entire credit card balance every month, with Gen Z and baby boomers being slightly more likely than others to do so.
A higher percentage of Gen Z, millennials, and Gen X respondents make the minimum required payment than pay their entire balance each month, but it's most common for each generation to pay their statement balance each month.
Notably, about a quarter of respondents across all generations said how much they pay depends on their spending that month. Still, it's always a good idea to pay the statement balance or at least more than the minimum payment.
| How do you usually pay your credit card bill? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| I pay the statement balance every month | 35% | 39% | 40% | 40% | 40% |
| How much I pay depends on my spending that month | 27% | 24% | 25% | 28% | 26% |
| I pay the minimum balance every month | 20% | 23% | 20% | 14% | 19% |
| I pay the entire balance every month | 18% | 14% | 15% | 17% | 15% |
Making the minimum payment will prevent you from being hit with late fees or other penalties, but interest will accrue on the outstanding balance.
Paying the statement balance prevents interest from being generated, but may not reduce your credit card balance to zero if you've used it after the end of the billing cycle you've just paid off.
Paying off the entire balance will bring your credit card balance to zero.
All generations prefer letting credit card rewards build over quickly redeeming them
Roughly 50% of respondents across all generations opt to let their credit card rewards accrue for as long as possible before redeeming them.
About a quarter of each generation of respondents like to redeem their rewards as soon as possible. Just over 10% say they don't use their rewards, leaving valuable free cash on the table.
| Which of the following best describes how you redeem your credit card rewards? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| I let my rewards accrue for as long as possible | 47% | 45% | 49% | 52% | 49% |
| I redeem my rewards as soon as possible | 26% | 25% | 22% | 26% | 25% |
| I redeem my rewards only for large expenses | 16% | 18% | 14% | 9% | 14% |
| I don't use my credit card rewards | 11% | 12% | 14% | 13% | 13% |
The preference for letting rewards build tracks with data from LendingTree, which found that 40% of credit card users hadn't redeemed points in the past year and 69% were holding on to unused rewards.
Depending on the type of card and rewards, there's a chance that some rewards come with an expiration date, so make sure to keep track of all offers you receive.
Over 50% of millennials and baby boomers put rewards toward their credit card balance
The most common use of credit card rewards across all generations is to pay down credit card balances. Over 50% of millennials and baby boomers respondents and just under 50% of Gen Z and Gen X opt to put their points toward their balance.
Redeeming rewards through their credit card rewards program was the second-most common use, selected by roughly a third of respondents across generations, with Gen X standing out at 41%.
Gen Z respondents are more interested in transferring points to travel partners: In fact, 21% of that generation said that's how they use their credit card rewards compared to about 10% of each other generation.
| Which of the following ways do you redeem your credit card rewards? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| I redeem my rewards to pay off my balance | 45% | 52% | 48% | 53% | 50% |
| I transfer rewards to travel partners | 21% | 12% | 11% | 11% | 14% |
| I redeem my rewards within the app's portal | 34% | 36% | 41% | 36% | 36% |
Gen Z and millennials are more conscious of credit card judgment than older generations
Roughly two-thirds of millennials and Gen Z respondents feel judged at least on rare occasions when they use their credit card in front of others. That's a much higher rate than Gen X (49%) and baby boomers (28%).
Millennial respondents are the most sensitive to considering what others think of their credit card choice when they throw their card down in public.
- 21% percent of millennial respondents said they always think of how others judge their card
- 29% said they consider it sometimes
- 18% said they think about it rarely
- Just 33%, the lowest of any generation, said they never think about how others judge their credit card choice
Baby boomers, on the other hand, care the least about what others think of their credit card choice.
- 72% of baby boomer respondents said they never consider what others might think when they flash their card
- 13% said they rarely think about it and 12% said they sometimes think about it
- Just 3% said they always consider how their credit card choice is judged by others
| When dining out or shopping, how often do you consider what others might think of your credit card choice? | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| Never | 36% | 33% | 51% | 72% | 49% |
| Rarely | 24% | 18% | 20% | 13% | 18% |
| Sometimes | 30% | 29% | 20% | 12% | 22% |
| Always | 10% | 21% | 9% | 3% | 11% |
It's easy to be impressed by the clang and heft when someone throws down a glossy titanium card, but looks aren't everything. Many of the best credit cards are made of good, old-fashioned plastic and they rake in rewards, have low or no annual fees, and may come with other perks -- even if they're not made of metal.
That said, there are some great metal credit cards, including some that net travel, cash back, and hotel rewards. However, many of these cards come with relatively high annual fees, so you have to pay for some of that extravagance.
Sources
- LendingTree (2022). "Nearly 7 in 10 Rewards Credit Cardholders Sitting on Unused Cash Back, Points or Miles."
Methodology
The Motley Fool Ascent surveyed 2,000 American adults via Pollfish on Nov. 7, 2023. Results were post-stratified to generate nationally representative data based on age and gender. Pollfish employs organic random device engagement sampling.
Our Research Expert
Jack Caporal is the Research Director for The Motley Fool and The Motley Fool Ascent.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.