I pay an annual fee on 4 credit cards.
When people ask, I tell them I need these cards for work. I am testing them; I need lounge access when I fly, travel coverage, and points in the categories where I actually spend. It is a good explanation. Everybody nods.
The reality is, I like what these cards do for me, and I renew all 4 every year without a second thought. I “feel” I get enough value out of them to justify paying multiple annual fees.
Is today just all TMI? No, I’m trying to make a point. As a Millennial, I am not surprised by the growth in fee-based cards. Gen Z is walking into the same place I did. Sooner, and in far bigger numbers. What surprises me is the industry’s skepticism about accepting that revenue from fee-based cards is the fastest-growing category.
Gen Z buys the card that moves them forward.
Price comes second.
Americans paid $3 billion in credit card annual fees in 2015. Last year they paid $8.7 billion.
I put that against our panel of 5,000 simulated shoppers to find out who is doing the paying. It is young people, almost entirely.
Gen Z and Millennials own about 41 million fee cards today. By the end of 2027, they own 49 million. Every older generation stays flat.
So the next 8 million fee cards go to people under 45. A small part of that is Gen Z turning 18. Most of it is people who already pay one fee and decide a second card is worth it.
8 million people are choosing to pay for something better.
The generation adding these cards is the one most willing to pay for a better one. 41% of Gen Z pick premium benefits over a low fee, more than anyone older.
My colleague Marisa Frys wrote a piece called Loyalty on Gen Z’s Terms, and one chart in it made me pause.
Cash back still wins with Gen Z. 53% take it. Then it fans out in a way it does not for anyone older. 39% take gift cards. 38% put points against a purchase. 35% use it for travel. 18% give it away.
Older customers take cash back and stop there.
More ways to spend a reward mean more ways to make it feel worth having, and they bring partners into the card. A partner funds part of that value, so you fund less.
77% of Gen Z want their bank to get them into events and experiences. Marisa’s full read on what Gen Z wants from a card is worth 5 minutes of your morning.
Which of these 5 does a 25-year-old actually use, and does our card do that one well?
79% of Gen Z would rather bank with a traditional bank than a challenger. More than any other generation. 77% want one bank for everything. A big bank starts this race in front.
Then the other half of the picture. 83% of banked Gen Z have already asked AI to help them pick a financial product. 76% would move if AI found them something better. 71% shopped outside their own bank when prices went up.
They want to settle down. They just want to check first.
So write your terms plainly. Put the fee, the benefits, and the earn rate on your own page in words a person can repeat out loud. The customer reads it. So does the AI sitting next to them.
And know what they ask for first. Improving a credit score beats every other reason Gen Z gives for picking a new card. Some brands already build for that. Chime sells everyday money management. Discover ties student credit to advice on what moves a score. Bank of America starts people in rewards at the checking account and gives them more the longer they stay.
40% of Gen Z will try a new AI tool when it clearly helps them. About half worry about reaching a human, and 47% want to know their data is safe. Keep a person one step away, and they will use it.
Write the reason for the fee on our own page, in plain words, before a customer or an AI asks.
Last week we split Millennials with one question. Have you achieved what you expected by this point in your life? 58% said yes.
The Ascended have the house, the partner, the child, or the degree. 46% of them put trust in the brand first. The Ascending are still climbing. 27% put personal values first, and 23% want to know whom they are buying from.
Now add the fee. The average fee a person pays reaches $164 by the end of 2027, up from $127 last year. The Ascended pay it for a brand they already trust. The Ascending pays it once they know who you are.
Gen Z asks both of those questions and adds a third. What does this card do for me?
Answer all 3 in one ad. Name the benefit. Say who you are. Show someone getting somewhere.
Our premium card sells trust to one Millennial and identity to another. Which one is our current ad talking to?
Gen Z is walking toward the premium card on their own. They want a traditional bank, a single relationship, and benefits that fit their life. We get 8 million new paying customers by 2027. They get a card worth keeping. Aspiration beats the bargain, and both sides win.
