Opinion: Credit Cards Must Evolve or Lose Gen Z Forever

You may think Generation Z (ages 12 to 28) and millennials (29 to 45) have little in common. But they do share a couple of key qualities: a preference for alternative payment tools and lower credit scores than older generations.

Abandoning credit cards isn’t just a problem for subprime consumers who could use these products to their benefit. It’s a warning for lenders. The future of your business is at stake. If you don’t lure them back with attractive products and strategies that inspire healthy usage, everyone loses.

A new survey from U.S. News & World Report revealed some concerning statistics about credit card usage:

• The most prolific users were baby boomers (ages 61 to 80), with 42% saying they most often use credit cards for common purchases.
• Only 27% of all other respondents say credit cards are their preferred payment tool.
• Approximately 20% of Gen Z respondents say they never use a credit card.
• Just 24% of millennials say they most frequently use credit cards for purchases. Seventy-one percent say debit cards are the payment method that feels most financially sound to them.

Baby boomers will eventually give way to the next generations, but what if the younger generations never fill the ranks? For subprime lenders, they should be your next long-term growth engine.

If younger consumers continue to avoid opening and using credit cards, you’ll face slower account growth and weaker engagement. When that happens, you may not be able to make up for the loss with other products in your suite of options.

What does this mean? Inspiring this demographic to pick up the plastic will be to your advantage.

The 2025 FICO® Score Credit Insights report found that Generation Z had the lowest average credit scores last year, with an average of 676. millennials had the next lowest scores, lagging behind Gen X and baby boomers.

Are these consumers financially irresponsible compared to older generations? Not necessarily. The report noted that, due to their age, Gen Z consumers have had less time to build savings and are less likely to have benefited from stock market gains and home price appreciation.

Younger consumers in general are also more likely to carry student loans. Since the resumption of student loan delinquency reporting, late payments have had a heavier impact on their scores.

But as many lenders compete for consumers with excellent credit ratings and high spending, you may want to do the reverse. This is your opportunity.

Gen Z had the lowest average credit scores in 2025, followed by millennials, according to FICO.

Credit cards have traditionally been an excellent entry point for people who want to build or repair their credit. If they don’t open cards with you, they will almost certainly turn to different payment methods.

Buy Now, Pay Later (BNPL) arrangements are particularly attractive. These are typically accessible to people with bad or no credit, but in most cases, the lenders don’t report account information to the credit bureaus.

As a result, these payment methods don’t help consumers build credit. That’s a major issue. Instead of getting a card they can grow with, subprime consumers remain outside the traditional credit system.

Debit-based products can also be alluring to this demographic, but the same problem emerges.  They are rarely reported to the credit bureaus, so positive activity falls under the radar.

Now is the perfect time to rethink credit card accessibility for this segment.

A credit card that is simple to qualify for, helps users stay out of expensive debt, and comes with valuable features to build a score should be an easy sell to subprime borrowers.

Alternative payment options can be great for certain purchases, but not for things like covering a restaurant bill, buying airplane tickets, or booking a hotel. Debit cards connected to bank accounts don’t come with the same consumer protection laws that credit cards do.

So what’s holding Gen Z back from pursuing a card? A 2025 Cash App study found that 68% of Gen Z respondents say credit card bills cause them stress and anxiety. High APRs associated with credit cards were not the defining factor, but rather the way these products made them feel.

Younger borrowers desire clarity, transparency, and guardrails, all of which you can and should deliver with credit cards. So simplify disclosures, reduce surprise costs, and offer real-time controls that give them visibility and agency.

Do so, and you may stem further attrition among entry-level credit users while capturing market share in a segment that’s ready to build their financial futures with you.