Introduction
Young people’s aspirations have always been big, but due to their current circumstances, maybe they aren’t satisfied with their lifestyles.Maybe because of the comparison or they see unrealistic larger-than-life movies.
Here, I’m not giving a lecture about life.
I am talking about the expenses that young people make to maintain a lifestyle above their income level.
Hence, Many credit card companies use common marketing tactics to market to young adults because they know they are impulsive buyers.
Marketing Tactics of Credit Card Companies
1. Student Credit Cards
Many companies offer credit cards for students with low credit limits, low charges, and other incentives. These cards also allow young adults to use credit cards with minimum risk for them.Since the income level of students is often irregular, such cards normally have relatively low credit limits so that the holders would not overspend.
In particular, student cards can offer cash back on purchases that are closely linked with students’ needs, like books, college courses, etc.
It is very famous because students always have a shortage of money, so they are always attracted to credit cards.
2. Sign-Up Bonuses
Offering bonuses for the first few months of credit card membership, which may amount to cash back, points, or free flights to encourage the cardholder to spend more, are offered by credit card companies to entice individuals to sign up for the card.Human beings like added value in a product, and young people would prefer that type of credit card over the normal credit card where they have to pay a fee and then they can use it.
3. Cashback Rewards
Young adults love cash-back offers. MasterCard-linked credit cards are actively available for spending categories such as food, groceries, and entertainment.Many companies offer cash back when credit cards are used for petrol, online shopping, or flight booking. Credit card companies thus trap young adults in their net.
4. Social Media Advertising
Almost 75% of businesses are now online. Generally, the most famous platforms for Social media platform advertisement are Facebook, Instagram, TikTok, and Snapchat.Credit companies know that businesses always require money to run, so they offer businesses the credit card option of “spend now and pay later.
" In that way, people rarely use prepaid options for advertisements.
5.Influencer Partnerships
The brand uses Influencer marketing on Social media and YouTube, collaborating with influencers with many followers and subscribers.They discuss the credit card's features and benefits in a way that makes people think it is necessary and useful.
Many big companies use this tactic to sell credit to Gen Z people because almost all of their target audience is on Social media platforms.
6. Referral Programs
Some credit card issuers offer promotions for existing cardholder referral programs.It is also noted that young Adults are most likely to use word-of-mouth recommendations, hence setting referral programs as effective.
Often, they offer bonuses in the form of cashback, additional reward points, and cash bonuses for both the referrer and the applicant, making the situation a win-win for everyone.
7. Easy Online Applications
Companies now come with easy online applications, which makes it easier for companies to issue credit card online applications with minimal documents and within the shortest possible time.Since millennials seeking services prefer digital solutions, they are more likely to get a credit card when the application process is fast, seamless, and mobile-enabled.
Also, young adult have less patience, so they prefer all things to be done in their comfort zone.
Even though some companies give the pre-approval check, that does not necessarily mean that the credit score of the applicant will be checked, and it becomes more suitable for all kinds of users.
8. Mobile App Convenience
Due to the increasing use of Smartphones, credit card application assistance creates conveniences that are helpful in account access, financial control, and payments.Such features are budgeting, access to the history of transactions, and a facility to block a card in the case of theft, among others.
Making digital services user-friendly ensures that the users are satisfied and can always engage more in a particular business.
9. 0% Introductory APR Offers
Another marketing strategy that credit card companies widely use is the APR offer.It is easier to pay off the initial amount as customers are offered zero percent interest for the first few months of purchases or balance transfers.
This can prove to be very useful for those who are going to make a big purchase, for example, buying a vehicle or availing a travel booking service, as it will help the person to make the payment without interest.
However, unlike in the introductory phase, where credit card companies may not earn interest, after this period, they are allowed to charge standard interest rates.
It can go from 15-20% depending upon their credit score. 10. Exclusive Student Perks Some credit cards have features such as discounts for students, ride-hailing services, and cash back for school stationery. These perks relate to the lifestyle and requirements of young consumers.
These benefits are usually offered with the cooperation of other firms such as Spotify, Netflix, and Uber that people use often. 11. Gamification tactics
Young consumers love engagement.Concerning that, Companies use game task challenges and make an interface that young adults tend to participate in.
For example, They challenge you to make more than 5 purchases in a week, which will give you, let’s say, 2000 points, and those points can be used for online shopping. Therefore, users' spending will increase, and the company’s motive will also be fulfilled.
12. Limited-Time Promotions
Including time-limited promotions like offering special incentives if the participants join within the next week increases the rate at which the youths apply.Some of the tactics include stating that an available deal is valid “while stocks last" or “for a limited time only"; this triggers FOMO, especially among young people.
13. Low or No Annual Fees
Young adults, especially college students, earn very little, so most credit card issuers avoid charging an annual fee on cards.In the beginning, the company takes away one of the main costs associated with a credit card and attracts new users to apply for a credit card without worrying about additional costs.
For some of them, it is important to note that the annual fee is not applicable during the first year.
14. Building Credit Awareness Campaigns
Many credit card companies are doing a good initiative, as they give awareness about how to use credit cards wisely and not to overspend.Usually, they go to schools in the corporate sector and receive education about credit cards.
Whereas, some write blogs and also take the help of digital advertising.
In this type of campaign, people’s trust increases, and they tend to become long-term customers, so the company not only spreads awareness among users but also uses this wonderful marketing strategy to sell their credit cards to people.
15. Buy Now, Pay Later Integration
Some credit cards allow users to make large payments, and they can convert that into EMIS easily, which is affordable for the young generations.Although the user thinks that he made a smart move by converting large transactions into small portions of money, he is not aware that he is been trapped by the company because later on he will end up paying a huge amount, including interest and taxes.
16. Co-Branded Credit Cards
Some companies have their co-branded credit cards based on famous brands or outlets – for instance, Amazon, Apple, or fashion brands.Earning or payment these cards offer privileges of a particular store or a certain type of financial offer in service of brands preferred by young adults.
I am using an ICICI Amazon card, which gives me 5% cashback on the total spending, and when the bill comes, cashback is added to the Amazon card, which I can use for online shopping on Amazon, recharge, or pay electricity bills.
17. Financial Education Webinars & Workshops
Credit card companies host free-of-charge webinars and workshops which may be themed to college or university students as well as young graduates.It educates youths to be financially responsible and eligible for credit with values toward the company’s credit products.
18. Tie up with colleges and universities
Credit card companies tie up with colleges and universities.However, those students who don’t get any internship opportunities on their own always have the option to do an internship from college tie-ups.
What they do is give internship opportunities to the students.
Students are required to do an internship, otherwise, they will not get a degree.
So, Students, during their internship time, sell credit cards, and whoever sells the most will get the incentive as well as an appreciation letter from the company.
19. Personalized Credit Offers
Credit card companies make specific offers on credit card use based on their consumer’s spending habits, likes on social media, or even the websites they frequent.For example, The person who travels more frequently will likely be given a travel rewards credit card.
20. Airport lounge offers
Many credit card companies come with Airport lounge access.With this card, you get premium food at a negligible cost.
You just need to swipe your card, and you can easily enjoy your food.
Mainly, those who travel the most are usually targeted because they are the target customers, and usually, these cards come with a decent amount of annual fees.
Disadvantages of Using Credit Cards
1. High-Interest Rates
Credit cards are useful when you pay on time; otherwise, regular interest rates on credit cards tend to be high.If you are unable to make the payments on time, you will have to pay a 45% annual fee, and this will be a huge burden for you as I have seen many people who initially depend completely on credit cards and later lose everything.
The interest rate of some credit cards increases on late payments, which creates additional hurdles for users when trying to pay off their loans.
2. Encourages Overspending
The option of credit cards convinces people to make rapid buying decisions but prompts them to waste money unnecessarily.Unplanned spending using credit cards often puts you in big trouble, which not only stops you from financial freedom but also causes a huge amount of stress when you are short of money.
3. Hidden Fees
Hidden fees associated with numerous credit cards exist in the form of annual charges and penalties for late payment.Moreover, if you aren’t able to spend more in a year, you will have to incur that cost also. So, including all the hidden costs will be so costly that you will always be at a loss if you’re using a credit card.
It is just the safety that a credit card provides when you need funds in an emergency, otherwise, it is just like a drug that looks good in the short term, but in the long term, it will harm you.
4. Negative Impact on Credit Score
Future financial opportunities become more difficult to obtain because of late payments.
I will tell you my story: I took a small loan for education purposes, and unfortunately, I missed it, and when I checked my credit score after 3 months, it was 60 points.So, having a bad credit score impacts taking a loan in the future. Even if you get a loan with a bad credit score, then you need to pay a high interest rate for it. 5. Risk of Fraud Credit card fraud, together with identity theft, operates as a major safety threat. Funds are at risk when someone loses their credit card, and many reasons behind this.
Recently, in my town, a restaurant manager lost 1 million dollars from his credit card through a fraudulent call, as he shared all the information about his credit card on the call.
Later on, he requested credit card authorities to cancel the transaction, but they refused because he had shared the information.
The security answers offered by banks do not eliminate the stressful process of recovering money and protecting personal information after theft events.
6. Minimum Payments Trap
Users face endless debt cycles when they choose to only make the minimum due payment. In the short term, it is acceptable, but in the long term, you will not be free of your debt if you just rely on paying the minimum due payment.You will not get free credit interest, and it will keep on adding, unless or until you pay the whole amount.
7. Debt Accumulation
Credit cards often result in severe debt when users fail to implement proper debt management.Excessive credit use will create financial instability, which makes monthly payment obligations challenging to achieve.
The practice of shifting debt among multiple credit cards develops into endless financial debt for some people.
That is why credit card companies want you not to pay your payment on time, as they are earning a good amount of money from your mistakes.
8. Complex Rewards Programs
The benefits from credit card reward programs become difficult to take advantage of because they include various strict rules and limited use dates, as well as expiration schedules.They make it so interesting and complicated that you will always be in a similar situation when you try to catch a mouse.
9. Psychological Stress
You will feel psychological stress when you always need to pay money to credit card companies. I have seen many serious cases where people commit suicide because they are unable to pay their debts in time and the interest keeps on adding.10. Potential Dependency
People who have less liquidity and unstable jobs cause financial instability. Generally, they are attracted to credit cards, and when they get credit cards, they become dependent on it for every product they want to purchase.When it comes to paying the bills, they struggle to pay their bills because their income is less, and their spending increases on credit cards.
How to Use a Credit Card Wisely
To optimize a credit card safely and have good financial freedom, you need to consider some points while applying for a credit card.Here are some guidelines regarding the practical use of credit cards:
1. Always Pay Your Full Balance
The best way to avoid these high interest charges is to ensure that you clear your billing statement. This helps in avoiding too much interest on the amount.2. Make Payments on Time
One of the important aspects of a credit score is timely payment of the amounts you owe. Make sure you pay the bill before the due date; otherwise, you will have to pay late charges, and your credit score will be impacted.3. Keep Credit Utilization Low
Credit utilization means the amount you’re using from your credit card limit. For example, if you have a credit card limit of Rs 1,00,000, then make sure you don’t use more than 30%, otherwise, your credit score can be impacted.4. Avoid Unnecessary Purchases
You need to be smart while using credit cards. You need to realize what is necessary for you and what is not. You should prioritize credit cards as a last option to make payments to buy a product.This way, it prevents using the credit card when it is unnecessary.
5. Choose a card that suits your lifestyle
Choose a credit card that is most suitable for your type of expenses. If you prefer food and dining, go for a card that is associated with eating places. If you are interested in cashback, it is worth turning to a cashback card with everyday spending habits.6. Understand the Terms and Conditions
In the case of credit cards, it is important to know the interest rate, annual fee, penalty for default in the payment, expiry date of rewards, etc. This information will save you from accidentally incurring such expenses.7. Use Rewards Wisely
Most credit cardholders fail to use their bonus points in time, leading to expiry. This is a way you should make sure that you’re using all these bonuses for the maximum time possible.Do not use your card with excessive expenditures or to get more rewards - it should only be used to make the purchases that have been budgeted for. Otherwise, you will be in trouble.
8. Avoid Cash Advances
A lot of people withdraw cash from credit cards. You feel you’re making a smart move by using this cash. But my friend, you don't know you are making a fool of yourself, and that is what credit card companies want.Make sure you do not withdraw cash from the credit card unless it is essential so as not to attract too many charges.
9. Monitor Your Transactions Regularly
Make it a habit to perform daily and at least weekly monitoring of your credit card statements and your online banking account to notice any possible fraud or mistake. This assists in avoiding fraud and unnecessary transactions.10. Use Budgeting Tools
Most credit card companies have developed budgeting options and controllers. You can customize the spending limit according to your needs, or you can decrease the credit card limit to help you spend less on credit cards.11. Avoid the Minimum Payments Trap
You should avoid the trap of a minimum-due payment policy because you will remain indebted in the long run due to compounding interest. It is always best to pay a higher amount than the minimum to help lower the balance.12. Plan for Emergency Situations
A credit card is good for use during emergencies but must not be used as a backup plan for any incident. It’s important to ensure you have an emergency fund that can help you survive when you’re facing financial issues.FAQs
How can a credit card affect my credit score badly?
- By not paying payments on time
- Applying multiple cards within a short period
- Closing old credit cards
- If you use your available credit limit more than the 30%
How do credit card companies earn money?
Credit card companies earn money through late payments, annual fees, cash withdrawal charges, and transaction charges from merchants.Are credit cards safe for online shopping?
Credit cards are safe only if you buy from an SSL website otherwise, your credit card details can be hacked. How to choose the right credit card? When choosing a credit card, firstly, you need to understand what you do the most, like travel or online shopping. Based on this, you should choose so that get the best rewards, plus you also have to look for annual charges and interest rates.Conclusion
In conclusion, while using credit cards, you need to be cautious about your approach towards them. Firstly, you need to know your budget and priorities. You also have to maintain your emergency fund if any financial loss occurs in the future.So that you don’t need to use credit for unnecessary purchases because, at the end of the day, you have to pay the bill; otherwise, you will always be surrounded by debts.