Millennials are warming up to credit cards, but on their own terms

Young adults are increasingly wary of big banks. In fact, they pretty much hate them. According to a U.S. study, millennials said large banks made up four of their top 10 most hated brands. That’s powerful, and damning to an industry entrenched in old ways. For large banks, the challenges are many and they will no doubt face competition from savvy financial-tech start-ups like Borrowell and Koho.

But as it turns out, it’s not all bad for the banks. According to a study by Equifax, these same millennials are warming up to credit cards as their earnings (and spending power) increase. Driven by rewards and credit card sign-up bonuses, millennials are ditching debit for credit. However these same panel participants “view credit cards with both caution and practicality”, and also believe “credit cards have a negative stigma”. It will be up to the banks to offer up products and services to shake this negative image.

Success with a New Generation of Cardholders

Here are four ways banks might find success with a new generation of cardholders:

1. Transparency and fair offers

Are you sick and tired of being dinged by your bank with hidden fees? For example, you haven’t used your credit card in a while, so you’re charged a $10 inactive fee. Sure, your bank might wave it, but you’ll have to go through the hassle of phoning them up and pleading your case. Instead of trying to pull the wool over the eyes of consumers, offers should be transparent and fair. Hidden fees and small “gotchas” will not keep these customers around very long. The old way of nickel-and-diming customers needs to stop.

2. Say goodbye to traditional ways

It’s the year 2015 – can you believe banks are still sending paper statements in the mail? While some customers prefer paper statements, the vast majority could do without them. Instead of cluttering up our mailboxes with paper statements and leaving us open to fraud and identity theft, let us opt out of paper statements. Get rid of traditional ways – don’t offer paper statements and definitely don’t send those “credit card cheques,” which are simply disguised cash advances. We know better.

3. Help build credit

If you’re planning a major purchase like a home or car, unless you’re Donald Trump’s daughter, you’re more than likely going to have to borrow money from the banks. Credit cards are a great way to build credit when used responsibly. Millennials want to take part in their ability to build credit. The banks should offer tools and resources to help them.

4. Slick apps and online tools

Are you tired of clunky phone apps that take forever to load? If the big banks hope to keep and win customers, apps and online tools must be slick. Don’t bombard these finicky customers with additional offers or additional services. Keep it simple!

The Bottom Line

As the next group of consumers, millennials are seen as the biggest growth opportunity for banks. But with new financial-tech start-ups popping up, they may eventually give the banks a run for their money. It’s up to the banks to step up their A-game, otherwise Millennials could end up jumping ship to financial-tech start-ups in droves.