Young Americans have long been wary of credit cards. After the Great Recession and record-high student loan debt, credit card enrollment and usage took a dive as Millennials tried to minimize their financial risk. A 2016 Bankrate survey found that only a third of those born between 1980 and 2000 said they had a credit card, compared to a large majority in older generations.
That trend seems to be shifting now, and it’s all due to travel rewards.
According to a recent study, 78% of Millennials applied for a rewards credit card in the last two years, compared to 29% of all cardholders. What’s more, 80% of them said their newest rewards card is now their go-to card. The type of rewards offered seems to be the driving factor. Nearly half of Millennials redeem their rewards for travel, more than any other age group, according to Discover.
This makes sense, considering that “travel” and “seeing the world” are Millennials’ top aspirations. But how are companies responding to the trend, and how will it affect the future of credit cards? No matter your age, here’s what to look out for in the evolving credit card market.
Today’s Best Offers: Flexible, Transparent & Personalized
The Chase Sapphire Reserve and Preferred Card are often credited with bringing travel rewards into the mainstream (including business travel rewards). Since originally launching over a decade ago, they’re still two of the most popular and widely used travel rewards cards today — and more than half of the Reserve card’s customers are Millennials!
Specifically, the Sapphire Reserve offers a $300 annual travel credit, 50,000 bonus points after signup, 3 points for each dollar spent on travel and restaurants, and access to 1,000+ airport lounges through Priority Pass Select. You just have to pay the $450 annual fee; alternatively, the Sapphire Preferred charges only $95. Both Sapphire cards come with no blackout dates or travel restrictions, $0 foreign transaction fees, and VIP access to events and experiences.
These cards highlight the features that attract today’s largest living generation. According to Skift.com, budget-conscious Millennials can’t afford to remain loyal to any one hotel or airline brand. Instead, they opt for travel rewards cards that can be used on a variety of travel-related expenses, including disrupter services like Airbnb, Uber, and Lyft. They want flexibility to use their rewards when and where they want to. And when it comes the most attractive redemptions, experiences win over physical goods and monetary perks.
For example, the new Marriott Bonvoy program allows its cardholders to bid on more than 120,000 experiences, including exclusive music festivals, sports events, and retreats. American Express also released The Platinum Card, offering a 60,000-point sign-up bonus, 5 points for every dollar spent on airfare and hotels, free credit for Global Entry or TSA Pre✓, and up to $200 in Uber credits per year. Unsurprisingly, Millennials are responsible for 36% of AmEx’s new accounts last year.
Co-branded credit cards are also springing up to cater to Millennials’ interests. Just look at the new Starbucks Rewards Visa Card, the PayPal Cashback Mastercard, the Uber Visa Card, and the soon-to-be-released Apple Card.
The Future of Travel Rewards
According to an Oracle Hospitality Report, 78% of today’s travelers say that immediate benefits are more appealing than accumulating traditional points. Plus, 75% say that they prefer loyalty programs that can be used at multiple brands.
If they haven’t already, loyalty programs are re-tooling to cater to these Millennial demands. While traditional rewards models focused on one brand, future travel rewards will be applicable to many, will make personalized offers based on cardholders’ behaviors, and will push experiences and upgrades over exclusive discounts that take longer to earn.
Major credit card companies may have been overzealous in winning over Millennials, though. According to The Wall Street Journal, the average cost of these rewards programs grows 15% year-over-year for card issuers. At Chase specifically, cardholders held $5.8 billion in unredeemed rewards by the end of 2018, a 53% increase from two years ago. Now Chase, Citigroup, and American Express are reportedly looking to reign in their rewards and shift their focus from enrollment to boosting long-term card usage.
The golden age of travel doesn’t seem to be ending any time soon, but travel rewards are certainly recalibrating to become more Millennial. Take advantage of the valuable sign-up offers now while you still can. Swift Passport & Visa Services Services is here to help you take on your next globetrotting adventure.
Rob Lee is co-founder of Swift Passport and Visa Services. Originally from Michigan, Rob is an avid fisherman and SCUBA diver who enjoys adventure travel.