Millennials and Generation Z Avoid Using Credit Cards and Favor Other Methods of Payment

People nearing retirement and relying on stock market investments to help fund their post-work years have had an uneasy start to 2025. Most major indices have fallen sharply from recent highs as investors fear the effects of a burgeoning international trade war.

But it’s not just those approaching their golden years who have found their personal finances in turmoil. A new report from Cash App Afterpay reveals that half of Americans surveyed aren’t able to afford a one-time emergency expense of $500 or greater.

And the lack of financial stability is weighing on American consumers. The report, based on research conducted by business intelligence company Morning Consult, highlights that 77% of Americans surveyed said they find managing their spending to be a challenge in the current economic environment.

Members of Generation Z — defined in the study as those between the ages of 18 and 28 — are in the worst shape when it comes to being prepared for emergency expenses. The majority of Gen Zers, 56%, have less than $500 in savings. 

Millennials, adults from 29 to 43, are the cohort that immediately precedes Generation Z. Exactly half of millennials in the study said they lack savings to cover a $500 emergency expense, according to the report.

“It’s not just a slow fade, but a generational reset pointing to a clear distaste of the traditional credit model that it’s not servicing their current needs.” — Alison Meyer, Head of B2B Marketing at Cash App

In addition to emergency savings matters, the survey asked respondents to detail their favorite payment methods. Both Gen Zers and millennials selected debit card payments as their most-preferred option, with 68% of Generation Z respondents and 74% of millennials identifying debit cards as one of their top choices to make purchases.

Both cohorts also ranked the same payment method as their least preferred option — credit cards. Only 35% of Gen Z respondents and 47% of millennial respondents selected credit cards as one of their preferred payment methods.

“It’s not just a slow fade, but a generational reset pointing to a clear distaste of the traditional credit model that it’s not servicing their current needs at a time when interest rates and cost of living are high,” Alison Meyer, Head of B2B Marketing at Cash App Commerce, said in an email to Retail Brew.

Merchants must learn shopper payment preferences to capture as many sales as they can. According to the Cash App study, 46% of Gen Zers will abandon a transaction if the merchant doesn’t accept their preferred payment method.

For merchants that do everything they can to gain a sale, the last thing they want is to lose a customer due to payment preferences.

The study dove into the reasons why members of Generation Z aren’t thrilled about using credit cards for purchases. Part of the problem for Gen Zers who are hesitant to complete a transaction with a credit card is that they don’t understand complicated credit card terms.

The majority of Gen Z respondents, 57%, reported issues with grasping card terms and conditions.

Moreover, more than two-thirds of Gen Z respondents said that credit card statements gave them a sense of anxiety. Some of that anxiety is likely fueled by reports of soaring credit card debt levels. More than half of Gen Z participants report that they’ve been caught off guard by the amount of interest they owe on their credit card purchases.

Unfortunately, their card-paying practices have left them open to surprises more often than not. Sixty-eight percent of Gen Z survey respondents and 70% of millennials who took part in the survey report not paying off their credit card balances in full each month, subjecting them to interest rate fees. 

Credit card issuers looking to entice younger generations to use credit cards can familiarize themselves with the payment methods younger consumer demographics prefer and seek to incorporate some aspects of those options into their offerings. Debit cards are popular with adults for their simplicity, security, and accessibility, the Cash App study revealed.

Gen Zers in particular are quick to produce their debt cards to complete transactions. Three-fourths of Gen Zers use their debit cards weekly, and 26% swipe their debit cards at least once per day. 

Buy now, pay later (BNPL) options are growing in use in the U.S. A recent J.D. Power survey indicated that BNPL use is on the rise across generations. 

“The BNPL segment has undoubtedly grown in popularity, with more customers using these services than ever before,” said Sean Gelles, J.D. Power’s Senior Director of Banking and Payments, via a press release. “That’s been especially true around seasonal periods of higher spending, such as the holidays.”

The J.D. Power survey said that more Gen Zers used BNPL services than credit cards during the 2024 holiday season, which was the first time the company noted that occurrence in the history of its study.

Generation Z turns to BNPL to complete transactions more than other generations.

The Cash App study’s findings further drive home the importance of BNPL to members of Generation Z. Thirty-eight percent of Gen Z respondents said they use BNPL services weekly, far outpacing any other generation. 

Meyer told Cold Brew that consumers value personalization and payment options that aren’t limiting. Merchants that accept a variety of payment methods may have an advantage when it comes to pleasing younger shoppers. 

“Just as important is the checkout experience, especially as Gen Z expects it to be seamless, mobile-friendly, and flexible, with trusted options like BNPL, debit, and even peer-to-peer payments,” Meyer said.