Published in: Credit Cards | March 5, 2019

Study: Why Swipe? American Credit Card Preferences and Habits by Generation

Generations of Credit: Exploring Credit Card Preferences and Habits in the U.S.

From cars to apartments and student loans to mortgages, credit is everywhere. Credit scores in America have hit an all-time high since the Great Recession, despite credit card debt also setting records. In 2018, the average American had over $6,000 in credit card debt according to CNBC.com, an almost 3% rise from the year prior.

While student loans are certainly crippling millennials, the generation often making headlines may not be the one racking up the most debt. But debt is only one drawback of owning and using a credit card, and it doesn’t always outweigh the benefits that swiping plastic can bring. So how does each generation approach credit cards, and how do their preferences differ? We surveyed 1,000 Americans who owned at least one credit card to measure their spending habits and financial well-being. Keep reading to see what we found.

Accumulating with age

Credit Card Cohorts: Overview of Credit Card Ownership and Debt. 1 in 10 respondents owned 6 or more credit cards. Average Number of Credit Cards Owned is 3 credit cards with a median credit limit of $9,500. Average Number of Credit Cards Owned by Generation: Millennials owned an average of 3 credit cards with a median credit limit of $7,500. Generation X owned an average 4 credit cards with a media credit limit of $11,250. Baby Boomers owned an average of 4 credit cards with a median credit limit of $11,000. Source: Survey of 1,000 people by The Ascent.

Most would think having more than one credit card would make it more difficult to juggle payments -- especially remembering to make them on time -- therefore hurting your credit score. It turns out, though, having more than one credit card can actually boost your credit score by giving you more credit to work with and more opportunities to prove your management skills.

According to our study, the average American owned three credit cards with a median credit limit of $9,500. Gen Xers and baby boomers owned an average of four credit cards and had fairly higher credit limits than their millennial counterparts. Of course, credit limit increases come with time and experience, so the generational difference is likely due to age.

Overview of Credit Card Debt: 60 percent of people have credit card debt. 56.7 percent of Millennials, 67.6 percent of Generation X, and 65.6 percent of Baby Boomers have credit card debt. Source: Survey of 1,000 people by The Ascent.

Millennials also had lower debt than the older generations, with only 56.7% holding some amount of credit card debt. Gen Xers had the most, with almost 68% of the generation owing money on credit cards. On average, cardholders across all generations owed around $6,000, matching the national average. Millennials still ranked lower than Gen Xers and baby boomers, with around $5,500 in debt, compared to $6,600 for Gen Xers and $6,800 for baby boomers.

Average Credit Card Debt Incurred is $5,937. Average credit card debt by generation is $5,453 for Millennials, $6,627 for Generation X, and $6,800 for Baby Boomers. Nearly 1 in 5 respondents were dependent on their credit cards to pay for basic living expenses. Source: Survey of 1,000 people by The Ascent.

Nearly 1 in 5 respondents actually depended on their credit card to pay for basic living expenses, which could benefit or hurt them, depending on the bills they choose to pay.

Who is transferring?

Money Merger: 38 percent of respondents had used a balance transfer to consolidate debt. Percentage of People Who Had Used a Balance Transfer by Generation: 32.6 percent Millennials, 46.1 percent Generation X, and 50.8 percent Baby Boomers. Source: Survey of 1,000 people by The Ascent.

Racking up debt on the wrong card can leave you repaying more than double the amount you borrowed in the first place. When balances get high on cards with high interest rates, some people turn to balance transfers, or open a new card with a lower interest rate and transfer their balance. Thirty-eight percent of respondents had used a balance transfer to consolidate their debt, the highest percentage being baby boomers. Only around a third of millennials used this fix, while nearly 51% of baby boomers did the same.

Kinds of cards

Preferred Plastics: Most Common Credit Card Types. Cash back 58.4 percent, Retail/store-specific 39.8 percent, Low interest 30.3 percent, Airline-specific/travel 16.3 percent, Balance transfer 14.9 percent, Secured 9.9 percent, Gas 9.0 percent, Business 8.1 percent, Hotel 5.7 percent, Student 5.3 percent, and Dining and entertainment 4.8 percent. Source: Survey of 1,000 people by The Ascent.

With most credit cards having a different interest rate and rewards program, which type is the most common for Americans to own? Almost 60% of respondents owned a cash-back card, and 40% used a retail or store-specific card. Cards with low interest rates also made the top three most preferred cards, but student cards and business cards were much less common.

Most common credit card types by generation: Cash back 57.8 percent Millennials, 62.0 percent Generation X, and 52.5 percent Baby Boomers. Retail/store-specific 38.7 percent Millennials, 39.9 percent Generation X, and 45.9 percent Baby Boomers. Low interest 29.6 percent Millennials, 33.7 percent Generation X, and 24.6 percent Baby Boomers. Airline-specific/travel 15.8 percent Millennials, 18.4 percent Generation X, and 13.1 percent Baby Boomers. Balance transfer 12.3 percent Millennials, 20.2 percent Generation X, and 14.8 percent Baby Boomers. Source: Survey of 1,000 people by The Ascent.

More Gen Xers owned each of the top five types of credit cards, except for retail or store-specific cards. For that type of card, 46% of baby boomers preferred it, while only around 40% of both Gen Xers and millennials did as well. Cash-back cards were much more popular with the two younger generations: Roughly 58% of millennials and 62% of Gen Xers chose that type of card.

New by next year

Credit Card Considerations: 23 percent of respondents planned to open a new credit card within the next year. Percentage planning to open a new credit card within the next year by generation: 24.7 percent Millennials, 23.0 percent Generation X, and 13.1 percent Baby Boomers. Source: Survey of 1,000 people by The Ascent.

Opening a new credit card can be a double-edged sword depending on its use. Despite the risk, 25% of millennials and 23% of Gen Xers planned to open a new credit card within the next year. Opening a new card may come with the risk of a lower credit score, but it can also come with a variety of rewards.

Which of the following do you care most about when applying for a credit card? Rewards/cash back 37.5 percent, Annual fees 22.8 percent, Brand 3.8 percent, and APR 36.0 percent. Note: Percentages may not total 100 due to rounding. Millennials were more than twice as likely as baby boomers to care about rewards or cash-back offers when applying for a credit card. Baby boomers were 39 percent more likely than millennials to care about APR and twice as likely to understand what APR means. Source: Survey of 1,000 people by The Ascent.

The majority of respondents cared most about rewards or cash back when applying for a new credit card, even more so than a low APR or any associated annual fees. What individuals looked for in a credit card was heavily dependent on generation, though. Millennials were more than twice as likely as baby boomers to care about rewards or cash-back offers when applying for a credit card, and baby boomers were 39% more likely to care about APR than millennials. Baby boomers were also twice as likely to understand what APR means, suggesting millennials may care more if they truly understood it.

Why swipe?

Money Motives: Top Reasons for Credit Card Ownership. 64.4 percent of people said to build credit history, 57.7 percent said to have a cushion for emergencies, and 48.4 percent said to earn purchase rewards. Source: Survey of 1,000 people by The Ascent.

While rewards on purchases were the main factor in deciding which credit card to apply for, only 48% of cardholders owned a credit card for that reason. The majority of respondents actually owned a credit card to build a credit history, which has a significant effect on credit score. Another top reason for card ownership was for use in case of emergencies. In times that cash runs out, having an available balance on a credit card with a low interest rate can save many people from sticky situations.

Top Reasons for Credit Card Ownership by Generation. 71.9 percent of Millennials and 58.2 percent of Generation X said they use credit cards to build credit history, whereas 62.3% of Baby Boomers use credit cards due to the convenience of not having to carry cash. Source: Survey of 1,000 people by The Ascent.

Owning a credit card for cushion in case of an emergency was pretty common across all generations. However, millennials were significantly more likely to own a credit card to build a credit history. Again, this is expected due to their younger age and potentially less experience. On the other hand, 62% of baby boomers owned a credit card simply due to the convenience of not having to carry around cash.

Cash or card?

Payment Preferences: Which of the Following Best Describes How You Make Payments? 57.5 percent use a debit card, 35.7 percent use a credit card, and 6.8 percent use cash. Source: Survey of 1,000 people by The Ascent

Although 7% of respondents preferred to use cash for most purchases, almost 60% preferred to make general payments with a debit card, and 36% preferred to use their credit card. Not only can using cards for everyday purchases earn users rewards, but also using a debit or credit card can make tracking expenses easier. Nowadays, every card comes with an app that makes it easy to view your daily, monthly, and yearly activity, so users can see where they need to cut back, if at all. Still, paying with cash can limit people to make purchases they truly can afford. Sixty-six percent of credit cardholders carried over a monthly balance -- something that wouldn’t occur if they stuck to the cash they had available.

66 percent of credit card holders carried over a monthly balance.

Reaching the limit

Maxed Out Money: Nearly 52 percent of respondents had ever maxed out their credit limits. 50.3 percent of Millennials, 58.8 percent of Generation X, and 39.3 percent of Baby Boomers have ever maxed out their credit limits. 33 percent of respondents said they will attempt to increase their credit limits next year. 37.2 percent of Millennials, 31.5 percent of Generation X, and 14.8 percent of Baby Boomers said they will attempt to increase their credit card limit. Source: Survey of 1,000 people by The Ascent.

Making purchases one truly can’t afford can quickly lead to credit cards being maxed out. Over half of respondents had maxed out their credit cards at some point, and Gen Xers reported having reached their limit more than any other generation. Despite not being able to keep up with their credit card purchases, a third of respondents will still attempt to increase their credit limit within the next year. Millennials planned to increase their credit limit more than the other generations, but 31.5% of Gen Xers planned to do the same.

Running a risk

Consequences of Credit: Perceived Drawbacks of Credit Cards. 66.8 percent said high interest rates, 64.5 percent said the risk of falling into debt, and 64.3 percent said accumulating debt. 35 percent of respondents had fallen victim to credit card fraud. 33.1 percent of Millennials, 37.6 percent of Generation X, and 42.6 percent of Baby Boomers have been victims of credit card fraud. Source: Survey of 1,000 people by The Ascent.

Reaping the rewards and having a buffer for emergencies are just one side of credit card ownership. Of course, some drawbacks come with swiping plastic too often.

Sixty-seven percent of respondents were most concerned with high interest rates, and another 65% were concerned about the risk of falling into debt. While 29% of respondents were concerned with the risk of identity theft, and only 16.5% frequently monitored their account for fraud charges, 35% had fallen victim to credit card fraud. Around 43% of baby boomers had been victims of fraud, while a third of millennials reported as much.

Keeping up with credit

Picking the right credit card and using it properly can not only save cardholders from becoming victims of fraud, but also prevent them from drowning in debt and lowering their credit score. There are obvious generational differences when it comes to views of and experiences with credit cards, but, in time, millennials are likely to catch up with baby boomers. Being educated on what credit cards are, how they work, and what credit really entails is vital to making smart financial decisions that have the potential to impact your future.

Whether you’re in search of a new credit card or just want to learn more about savings and getting out of debt, we have all the information you need at The Ascent. Our team of experts does the hard work of vetting financial offers, so you don’t have to. Simply browse through the best offers and read reviews, so you can be confident that your decision is financially sound.

Methodology and limitations

For this study, we conducted an online survey of 1,000 people in the United States about their credit preferences and habits. To qualify for the questionnaire, participants were required to own at least one credit card and must have been at least 18 years or older. The survey measured credit card ownership, spending habits, and financial well-being among participants. Of the 1,000 people polled, 58.8% were millennials, 28.2% belonged to Generation X, and 10.4% were baby boomers. The remaining 2.5% of respondents were either a part of the silent generation or Generation Z. Of the respondents, 43.2% identified as male, and 56.7% as female. Only generations with a sample size of 26 or more respondents were included in the appropriate breakdowns. An attention-check question was administered throughout the survey to ensure respondents were paying attention and read through questions thoroughly. If a participant failed to answer an attention-check question correctly or entered inconsistent data throughout the survey, they were ejected from the study.

Some answer options may have been grouped, or bucketed, and relabeled for clarity. One limitation of this study is that respondents were presented with broad credit card categories instead of specific card types (the Chase Sapphire® card, for example). We understand that some credit cards may include multiple perks and offer a plethora of rewards, but for the sake of this survey, we focused on primary offerings per card (a travel or cash-back card, for example). The main limitation of this analysis is that the findings rely on self-reported data. There are several issues with self-reporting, which may include but are not limited to the following: exaggeration, telescoping, or attribution. The claims in this study have not been tested for statistical significance.

Fair use statement

Do you know someone struggling with how to use his or her credit card or manage debt? They may find this article useful. We permit you to share this study’s information and graphics for noncommercial purposes. Just don’t forget to link back to this page to give the authors proper credit.

 

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