The Credit Confidence Gap and What It Means for the Next Generation of Cardholders
By Nicole Volpe, Contributor at The Financial Brand
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Executive Summary
- Young consumers lack basic credit knowledge — nearly half of 18 to 24 year-olds don’t know their own credit score, and many believe myths like “more credit cards automatically improve your score.” This knowledge gap leads to poor financial decisions that set them back.
- Gen Z’s average credit card balance jumped 62% in just two years (from $2,000 to $3,300), while millennials saw a 50% increase to $6,700. The share with subprime scores has grown from one-quarter to one-third, signaling mounting financial stress.
- Over 80% of younger consumers say their financial planning needs improvement, and more than 70% have questions but don’t know where to turn — yet only 28% have received professional support. Financial institutions that provide timely, personalized guidance now can build lasting relationships with generations poised to inherit $46 trillion (millennials) and earn $74 trillion (Gen Z).
Financial institutions serve a wide range of financial journeys but few consumer segments are as consequential for future growth, as younger adults navigating credit for the first time. Consider three hypothetical accountholders.
- Jane, a millennial in her mid-30s, has a stable job and a decent income, but carries more than $6,500 in credit card debt. She pays on time, but only the minimum, and isn’t sure how interest rates affect her payoff timeline (or her savings, for that matter). She checks her credit score once a year — if that — and assumes it’s “fine” because she hasn’t missed a payment.
- Marcus, a 24-year-old Gen Z member, opened his first credit card two years ago and now has a $3,300 balance. He recently read online that having more cards can boost his score, but doesn’t know how utilization or payment history factor in. He’s eager to build credit but unsure which moves will help and which might backfire.
- Ava, 22, also Gen Z, has no credit card at all. She’s been turned down twice for lack of credit history, and the denials have made her hesitant to apply again. She relies on debit for everything and worries that her lack of credit could hurt her when she’s ready to rent an apartment or finance a car.
Jane, Marcus, and Ava are at different points in their financial journeys, but they all exemplify what might be called the “credit confidence gap,” a mismatch between what they need to know to optimize their use of financial products and what they actually do know. These personas also, critically, represent market segments that banks and credit unions must win over to secure future growth.
A new white paper from Elan Credit Card — Helping Cardmembers Take Control of Their Credit and Build Lasting Financial Confidence — explores the credit confidence gap, with special focus on Millennials and Gen Z, segments that will drive the next wave of accountholder expansion. While these consumers may lack resources now, the white paper says, they won’t in the future: Millennials are projected to inherit more than $46 trillion over the coming decades. And Gen Z will bring in $74 trillion in income by 2040, which would make it the richest generation in roughly a decade’s time.
Perhaps more important, both of these cohorts need, and want, practical, timely guidance about financial services from a trusted source. For financial institution leaders, building trust and engagement with these consumers now, while their earning power and assets are still growing, is a priority. But to do so, these leaders must first understand the dynamics underlying the credit-confidence gap—the fear factors and knowledge gaps that are driving their youngest accountholders’ financial behaviors. Drawing on the white paper’s findings, here are four essential insights:
Want more insights like this? Check out Elan’s content portal: Credit Card Issuance: Strategies & Solutions
Insight No. 1: They Struggle to Crack the Credit Score Code
Credit scores influence some of life’s biggest milestones: renting an apartment, buying a car, qualifying for a mortgage. Yet many cardmembers don’t fully understand how scores work and what affects their rise or fall.
First some context: credit scores are to some degree a function of age. Younger generations tend to have lower average scores, with Gen Z averaging 665, and millennials clocking in around 687, according to analysis by FICO. By middle age, the average score is above 700, with Boomer and Silent Generation averages hovering around 750.
Some of this pattern reflects the arithmetic of time: It simply takes more years to build a credit history and demonstrate consistent repayment habits. But it also points to uneven access to credit education, leaving younger consumers with a steeper learning curve.
“Ensuring that you provide education and a variety of products to meet the unique needs of individual consumers is imperative,” said James Otis, Head of Credit Underwriting at Elan Credit Card. “This includes those who are just starting their credit journey or repairing credit or reaching any financial milestone along the way.”
Nearly one-third of consumers don’t know their credit score at all, according to a survey by BadCredit.org, a education resource for consumers. At the same time, basic misunderstandings are common: more than half don’t know what a FICO score is, with 44% confusing FICO with a credit reporting bureau. Many still believe that checking their own score will cause it to go down. And age disparities persist: Fewer than half of 18- to 24-year-olds say they know their own score, compared to more than 70% of adults ages 25 to 64, according to BadCredit.org’s survey.
The Marcus persona exemplifies the confusion and lack of support many younger people experience. Like Marcus, these consumers are motivated to do the right thing for their credit, but without a solid understanding of how scores are calculated, they risk making choices that will in fact set them back.
Another common misconception is that more credit cards automatically lead to a better score. In reality, responsible use — on-time payments, low balances, and controlled utilization — matters far more. Yet 35% of Gen Z and 29% of Millennials believe they should have more cards than they do now, a survey by MotleyFool found.
The Ava scenario highlights the other side of the equation: the barrier faced by those with no credit history at all. Without a track record, she struggles to get approved, which in turn prevents her from building the history she needs.
Banks and credit unions can address both situations with education and accessible products. For consumers like Ava, secured credit cards offer a safe way to start. They require a refundable deposit, report activity to credit bureaus, and can transition to unsecured cards with better terms after six to twelve months of consistent on-time payments.
“Secured cards are such a great tool for those building or repairing their credit,” Otis said. “We see a large percentage using these products graduate to unsecured credit cards. Often, the graduation will be automatic — a plus for younger generations who want things to be easy and instantaneous.”
Research by the Federal Reserve Bank of Philadelphia supports this path. Graduates of secured card programs are just as likely as other cardholders to maintain good habits, are 33% more likely to get credit limit increases over four years, and show charge-off and delinquency rates no higher — and sometimes lower — than peers who started with unsecured cards.
Insight No. 2: They’re Feeling the Heat, and Indebtedness Is Feeding the Fire
Credit knowledge isn’t the only issue. Among the youngest borrowers, credit card balances are climbing at the fastest pace. A survey by Intuit CreditKarma revealed that, between March 2022 and February 2024, Gen Z’s average balance jumped 62%, from about $2,000 to $3,300. Millennials saw a 50% increase over the same period, rising from $4,500 to $6,700. Millennials now carry roughly twice the average balance of Gen Z, yet both groups have experienced the same troubling trend: the share with subprime scores has grown from about one-quarter to one-third in just two years.
The Jane persona, carrying a $6,500 card balance, fits squarely in the pattern for this generation. Even though she’s making payments on time, high balances relative to her credit limits may be dragging down her score and are certainly costing her more in interest. Without guidance, she may not realize the degree to which accelerating repayment or reducing her balance could improve her financial outlook.
High interest rates magnify the problem for both Jane and Marcus, making card debt especially expensive for consumers with lower scores. More than half of Gen Z (56%) and over two-thirds of millennials (69%) say they are worried about the economy, citing inflation, debt, and rate uncertainty, the CreditKarma study said.
Insight No. 3: They Have Surprisingly Long Tenures (But Don’t Take Them for Granted)
It’s easy to assume that younger generations are quick to switch institutions. But the data tells a more nuanced story. Even younger millennials — those between ages 26 and 32 — have kept their checking accounts for an average of more than nine years, a BankRate survey said. That’s a substantial relationship in any category, but especially in financial services.
Still, length of relationship alone doesn’t signal loyalty. Many young accountholders maintain a single account out of convenience or inertia, not engagement. They may rarely interact beyond basic transactions, and may not view the financial institution as a go-to partner for borrowing, planning, or building credit.
“It’s true that many young consumers favor their needs over loyalty, so don’t make them choose,” Otis said. “Make access to products they need easy, deliver education and guidance digitally, and continue to anticipate what they need.”
That dynamic becomes a risk when financial needs change and/or product complexity increases. Younger accountholders are more likely than older ones to consider switching institutions when they encounter fees they don’t understand, struggle to get approved for credit, or find the digital experience clunky or out of step with how they manage the rest of their lives. And in fact, Gen Z and millennials currently pay more in monthly fees — averaging $19.13 and $15.55, respectively — than any other generation, according to another BankRate survey. Those costs can erode trust quickly if they aren’t accompanied by visible value or useful support.
That’s where digital expectations come into play. Consumers like Jane, Marcus, and Ava expect the convenience and immediacy of mobile tools. They want to check their credit score in the same app where they move money, set up payment plans, or track spending. And they want that information in plain language, without having to navigate jargon or generic advice. For Jane, a mobile tool that shows how an extra $100 toward her balance affects her payoff date could be a turning point. For Marcus, real-time credit score updates tied to payment behavior could replace guesswork with certainty. For Ava, clear guidance on using a secured card could help her gain the confidence to apply for an apartment or car loan.
In other words, tenure creates opportunity but only if banks and credit unions use it to strengthen the relationship. That means making sure customers like Jane, Marcus, and Ava know what tools are available to them, how to access credit responsibly, and where to turn when questions arise. Quiet disengagement is a well-known phenomenon in e-commerce: It can last for years until a consumer’s frustration reaches a breaking point, or a competitor makes it just a little easier for them to switch, or their needs finally, definitively outgrow their current experience.
For younger generations, the risk is especially high, as a wide range of established fintechs compete for their attention with mobile-friendly solutions to specific, immediate financial problems.
Insight No. 4: They’re Hungry for Guidance
Confronting financial complexity, Gen Z and millennials are actively looking for help. Northwestern Mutual’s 2025 Planning & Progress Study revealed that more than 80% of younger consumers say their financial planning needs improvement. And more than 70% report having financial questions but don’t know where to turn for answers. Only 28% in either group say they’ve received professional support.
That unmet need creates both a challenge and an opportunity. When consumers don’t have access to trusted guidance, they’re more likely to default to advice from other online sources, anecdotal advice from peers, or take no action at all. Behaviors like these, rooted in uncertainty, tend to reinforce avoidant habits, especially when stakes feel high or decisions are unfamiliar.
Otis said: “Financial intuitions need to deliver education and guidance before a consumer knows they need it. You’ve already invested in the acquisition of each consumer for accounts — keep that momentum and engage them, surprise them, and make sure they know you’re in their corner.”
Jane, Marcus, and Ava are all at different points in their financial lives, but each of them illustrates how a lack of context can undermine confidence. Jane isn’t sure whether her repayment strategy is actually helping her. Marcus doesn’t know which credit behaviors matter most. Ava, having been denied credit before, assumes she’s stuck on the outside looking in.
Financial institutions’ existing trust advantage puts them in a strong position to fill these needs. But with some caveats: The guidance they provide can’t be generic. And it can’t wait until a cardmember or accountholder asks for help. It needs to be specific, timely, and aligned with their current behaviors, goals, and life stages.
Jane may inherit assets in the coming years, but without support, she could miss opportunities to reduce debt or invest effectively. Marcus and Ava, still early in their financial lives, will need guidance to align credit health with broader goals, from clearing out old debt, to securing housing, to saving for retirement.
“There is incredible opportunity to ensure your cardmembers have long-term financial success,” Otis said. “Is there a way to educate kids at a local high school? How about those going off to college? Connect with them early, often, and in ways that engage them in personal milestones.”
Delivering Support at Scale
Providing this kind of personalized, context-aware guidance at scale feels daunting: Many institutions face operational or risk-based limits that constrain how broadly they can extend credit or how deeply they can engage cardmembers across different life stages. But tools and partners are available that can help close the gap: services that make credit scores visible and understandable, apps that link payment behavior to planning outcomes, educational content for major life milestones, and flexible repayment options that reduce friction without growing debt.
Consumers like Jane, Marcus, and Ava want to level up their financial relationships but the credit confidence gap is holding them back. To meet their needs, financial institutions must build on their long-standing trust, especially at a time when accountholders’ financial burdens are heavy and their expectations for transparency and immediacy are rising. With the right mix of accessible tools, consistent communication, and thoughtful program design, banks and credit unions can reinforce their value in ways that last well beyond the next transaction.
