The news: Debit cards are Gen Z’s favorite payment method, with more than two-thirds (69%) reporting daily or weekly users, per a study from EY.

Only 39% of Gen Zers reported frequent credit card use, per the survey—compared with 51% for older generations.

The reasons behind this:

• Lack of understanding. Among consumers who don’t use credit cards, Gen Zers were twice as likely to say they didn’t understand credit card offerings as non-Gen Z respondents.
• Limited credit access. It can be difficult for young consumers to access credit without prior credit experience. While this is always as generations enter adulthood, Gen Z may be having an even harder time as banks tighten their credit card standards.
• Scared of debt. Many Gen Zers were raised in a culture that was highly skeptical and cautious of debt. And many have substantial student loan debt, making them wary of taking on additional debt. Record high credit card interest rates are amplifying those concerns.

How providers are responding: As Gen Z’s spending power grows, payment companies are offering innovative mobile-first debit card offerings to capture this volume.

• Chime’s debit card, for example, rounds up transactions to the nearest dollar and automatically transfers the extra money into its high-yield savings account.
• Experian launched the Smart Money debit card to help consumers build their credit scores using payments for bills like utility and rent.
• BNPL providers like Affirm and Klarna, which are already popular with Gen Z, have also launched debit cards to capture more spending volume.