Nov 20, 20184 min read

From Plastic to Virtual: Why Millennials and Credit Cards are Breaking Up.


The classic dating phrase “it’s not you, it’s me,” pretty much sums up the relationship between millennials and credit cards. This has continued to be the trend for the past few years and is posing ongoing challenges for merchants.

In fact, last year we detailed just how significantly millennials started to shy away from credit cards. Fast forward to today and it appears the trend is sticking. Debt-conscious millennials have now become budget-conscious, and merchants must think creatively about how to market their products to younger shoppers.

To keep up with their shifting habits, merchants should be equipped to accommodate this generation’s demands. As we discussed in our previous post, the 2008 crash had a chilling effect on how millennials view credit card debt. But merchants need not use this as a crutch. The past decade has brought about new payment, checkout, and technology shifts, giving millennials more appealing options.

Instead of accepting what you can’t control, focus on what you can: how your millennial customers can interact with your goods, and how you can give them checkout and payment flexibility that meets their needs.

Millennials and Credit Cards

The millennial aversion to credit cards and debt didn’t happen overnight. But it is making its mark in the payments ecosystem. Data from showed that just one out of three millennials has a credit card. For those who do carry plastic, they prefer prepaid or debit, alluding to their preference for budgeting purchases over time.

With the money they do have, millennials value spending money on experiences over things. Smart merchants are thinking about how to market their goods as an extension of an experience, instead of simply another product to buy. Millennial consumers don’t want to buy into a product, they want to be part of a culture. They also want to control their own shopping experiences to fit their lifestyle, and an easy way to give them that control is by offering payment options.

Most millennials are already saddled with debt from college, contributing to their desire to control their budget. The latest data suggests that roughly 70 percent of college grads have student debt, a number that continues to rise each year. On average, millennials are shelling out $351 a month towards their student loans. More focus on paying off rising student loans means less focus on saving for those milestone purchases. Since many are already spending a large chunk of income paying off debt, they’re interested in alternative ways to fund big purchases.

The trick to engaging millennials is putting them in control of how they want to pay. If taking on credit card debt to fund purchases isn’t in the cards (particularly for big-ticket items), it’s up to merchants to figure out how to make these purchases more appealing.

How Millennials Actually Prefer to Pay

Don’t expect millennials’ attitude towards credit cards to change anytime soon, and continuing to only offer a payment method they don’t like won’t get merchants very far. Instead, the focus should be on flexible, transparent options that allow shoppers to pay for items over time without heaping on the credit card debt.

For big-ticket items, millennials still seek financing to ease the burden of up front cash. One option worth considering is instant financing — a flexible, easy-to-use, revolving line of credit that puts consumers in charge of the payment experience. This option empowers shoppers to pay on their terms by spreading purchases over time with low APR offers.

In collaboration with Researchscape International, Klarna surveyed consumers to determine the shift in consumer attitudes and expectations at checkout. The study revealed that 47% of consumers surveyed would like to be presented with an instant financing option while shopping online. To that same extent, 40% of people surveyed would spend more money on a purchase if they had the option of instant financing, and 75% would be likely to select an online merchant that offered instant financing over one that didn’t.

The millennials and credit cards relationship might be complicated, but that doesn’t have to be the case for the millennials and merchants relationship. This complicated generation is demanding more options than simply taking on credit card debt, and merchants should take advantage of this shifting trend. As consumers demand more choices at checkout — as well as greater control to pay over time — early adopters of instant financing will see larger online carts and greater results.