From the lenders’ standpoint, millennials are a massive group of potential consumers — now surpassing baby boomers as the nation’s largest living generation, according to the Census Bureau.
Young people are spending more than other generations on everyday purchases such as groceries and gas, as well as on experiences such as dining out, according to a report by Bankrate.com.
To lure those spenders, card issuers have upped the ante with better rewards and sign-up bonuses. And it’s working.
The Chase Sapphire Reserve card, which initially offered a $1,500 sign-up bonus to people who spent $4,000 in the first three months, proved so popular, particularly among millennials, that the bank said it cost it some $200 million in profits (even with a $450 annual fee).
Last year, more than a quarter of all credit card originations came from consumers ages 18 to 34, according to TransUnion’s latest quarterly report.
However, for borrowers — particularly those just starting out — enticing rewards generally go hand in hand with higher-than-average interest rates to compensate issuers for the additional perks.
For example, if you have a $3,000 balance on an Uber card with a 16.49 percent APR and only pay the minimum, it will take 14 years to pay it off and over $3,200 in interest to boot.
If it’s the Ikea card and the interest rate is 21.99 percent, that $3,000 will take an additional year and over $4,430 in interest charges to pay down.