Gen Z’s credit card obsession

American Express was the ultimate boomer credit card. Not anymore.

American Express used to be your dad’s card. OK, your rich dad’s card. Or, fine, your rich friend’s rich dad’s card. But now, for a growing cohort of Gen Zers and millennials, it’s their card, too. Amex has cracked the code with the young and managed to do so without giving up its prestige image.

American Express has long been viewed as a fancy credit card company. Its products were historically seen as being for jet-setters and the wealthy, with “wealthy” usually translating to “older.” The idea wasn’t that young people wouldn’t use any Amex products but that they’d get initiated into the low-level ones and eventually graduate to the most premium versions of its cards as they got better jobs, made more money, etc. Amex also wasn’t broadly accepted because of its swipe fees, meaning what merchants pay every time they run a credit card. For years, customers were likelier to get a no on using their Amex at any given merchant than they were when paying with a Mastercard or Visa, sometimes making the former a headache.

But that has started to shift. Amex has updated its benefits mix to focus on younger people and the things they might like. It has used those perks to get Gen Zers and millennials — many of whom have that “wealthy” status — to sign up for premium cards sooner rather than later. The companies’ acceptance rate, at least in the US, has also improved significantly. You no longer have to enter a restaurant or store to check whether the American Express sticker is on the door. Add all this up, and Amex morphs into a popular, relatively accessible status symbol for young consumers.

The fruits of the new strategy were clear in the company’s first-quarter earnings presentation: Gen Z and millennial consumers made up 33% of its billed business in its consumer division, meaning using its products for purchases. By contrast, Gen X represented 37%, and baby boomers 31%. According to the company, millennials and Gen Z consumers made up 60% of its new customer acquisitions worldwide, and millennials and Gen Z members opened 75% of its new platinum and gold accounts. Those accounts come with some excellent rewards — and some high accompanying fees. The gold card costs $250 a year, and the platinum $700.

“We realized that going after millennials and Gen Z was a key thing for us,” Amex CEO Steve Squeri said in an April interview with Jim Cramer on CNBC. He explained that while the company used to target them with no-fee cards, it had now turned to trying to attract them with premium, high-fee cards. “With millennials and Gen Zs, what we realized is that they wanted access, they wanted experiences, they wanted to get special privileges,” he said. So Amex delivered.

Amex has implemented a number of tactics to pull off its youth revolution and cement its place as a status symbol among relatively affluent millennial and Gen Z consumers. As Squeri alluded to, it’s done some thinking about what the younger crowd wants in terms of rewards. Yes, travel points for flights and hotels are nice, but so are other benefits that have helped turn it into more of a lifestyle card than just a travel card, Michael Miller, an analyst at Morningstar Research, said. The company has folded in rewards such as credits on Uber rides, Disney streaming services, and New York Times and Wall Street Journal subscriptions. It puts money toward Saks shopping sprees and offers credits for Walmart+ memberships.

“They finance this by working with the actual retailers to split the cost, and they essentially act as really high-end coupons,” Miller said. “That’s really how they keep the appeal and keep it luxury, by not compromising on the price of the cards themselves.”

Amex gives some of its customers special access to various events, including a chance to buy tickets early or get certain passes to the US Open and Coachella. It sometimes gives them reserved spaces inside those events, too, keeping its reputation of exclusivity intact. I, for one, have found myself at events staring at some American Express exclusive space and trying to see whether anyone I’m with has the magic card to get us in.

“Amex is like, ‘You know what? We know that this age cohort is attending Coachella. We’re going to have — if you have a platinum card, you can get into the Amex tent. And we’re going to have simple things that are hard to get or expensive to access at Coachella, such as free water fountains and a place to sit in air conditioning,'” Daisy Hernandez, the credit-cards editor at The Points Guy, said. “Those are the kinds of people who are like, ‘I’m going to have this credit card because I want this extra premium access.'”

Millennials and Gen Zers, many of whom are hungry for experience over possessions, are not sleeping on the Amex travel perks, either. The platinum card, for example, offers credits on hotels and airline fees, covers the cost of a Clear Plus membership for airport security, and grants complimentary lounge access at multiple airports. It also has restaurant reservation perks through the platform Resy.

“They haven’t ditched the travel stuff at all,” Miller said. “It’s more of an addition.”

They’re laying the groundwork for the next generation.
For many young consumers, having an Amex rewards card is like having a good, varied subscription service that runs them less than $60 a month. Amex says that the platinum card’s credits are worth something like $1,500 a year, which is more than double the annual fee. (Amex, of course, has a ton of cards that aren’t premium and have a variety of different perks or benefits. It’s an actual choose-your-own-adventure situation, depending on which one you might want, if you do at all.)

On American Express’ part, this all makes sense. Many young consumers don’t carry cash and expect to be able to put everything on their cards. The company’s continued focus on high-income, high-spending customers, including Gen Zers and millennials, gives it more bargaining power with merchants who don’t want to turn them away. And once Amex gets those customers in the pipeline, it has a lot more time to get value out of them compared with older consumers who are closer to retirement and, you know, death.

“They’re laying the groundwork for the next generation, and they feel they have a great offering and great growth potential because if you’ve only catered to the much older, those folks are not going to be around, potentially, in 20 years, whereas the millennial still will be,” Stephen Biggar, the director of financial-institutions research at Argus Research, said.

Amex is one of many targeting the rich, young crowd. Chase Sapphire, for example, is giving it a run for its money with some of its offerings, namely, its Reserve card. And all consumers should consider the trade-offs of their pricey rewards cards. Research has found that rewards cards can be a transfer of wealth from the poor to the rich because of the high swipe fees that come with them (though those swipe fees are coming down a little for a few years). And even if you’re not concerned about what happens to the guy paying cash behind you at the bodega, if you don’t pay off your credit card bill every month and instead carry a balance, you may not get the bang for your buck on your rewards.

All that aside, the Amex Platinum Card seems neat. Did I spend a significant part of the reporting for this story repeatedly looking up said card and trying to decide whether I should eat the fee and get one? I did. I’ve got some travel coming up, and the Centurion Lounge sounds nice.