As spending habits shift due to COVID-19, millennials are shopping around for another credit card, with reward programs topping their wishlists.
Nine per cent of millennial cardholders have changed from their main credit card to another in the past 12 months, new research from J.D. Power showed. The study defines millennials as those aged between 18 and 39 years old.
Almost 40 per cent of switchers say they replaced their credit card with one with a better rewards program.
And while Australians may be feeling better about their personal financial situations, nearly half of millennials with credit cards are spending less on their plastic due to the pandemic. The age group accounts for 21 per cent of cardholders in Australia.
It’s not just millennials who are relying less on their plastic. Credit card spending fell $5.82 billion, or 25 per cent, in the 12 months to May 2020, the latest data from the Reserve Bank of Australia (RBA) showed.
Intentions to switch cards are strong, with more than one in five millennials having their eyes on changing in the next 12 months. This is double that of older cardholders, with one in 10 of those aged 40-plus wanting to switch cards.
A third of surveyed millennials said they want to change to a credit card that has a better rewards program and better benefits, while a quarter said they wanted to avoid paying an annual fee.
Changed spending patterns
Bronwyn Gill, head of banking and payments intelligence at J.D. Power Australia, said today’s millennials are savvy and are weighing up their credit card options for one that accommodates their new spending habits.
“However new spending habits are directly influencing the ability to accumulate and redeem rewards,” she said.
As consumers look to better plan their expenses and seek different ways to make payments, 37 per cent of Australians say they have used buy-now-pay-later (BNPL) or instalment plans to manage their finances in the past six months, a survey commissioned by American Express found.
More than half of those surveyed have thought about taking out small personal loans, while a third considered using lay-by on in-store instalment plans.
In light of changing spending patterns, American Express has introduced a new instalment feature, called Plan It, which comes built into some of the company’s credit cards.
Unlike BNPL services, where a purchase may be split into multiple payments, Plan It users can create instalment plans against their own credit card balances of $150 or more. The payment plans can be spread over three, six, nine or 12 months. Users may need to pay a fixed monthly fee but zero interest.
Austin Huntsdale, vice president of consumer lending at American Express, said the new instalment feature may help people who want more control over their finances and are seeking financial flexibility.
“Australians are looking carefully at their personal finances. They’re planning more diligently to be able to absorb unexpected expenses,” Mr Huntsdale said.