One in every two UK residents is reportedly looking to give up their credit card completely for Christmas shopping in 2021, with two-thirds or 66% of credit card holders saying they want to avoid having to pay excessive credit card interest.
Even though credit cards have been offering interest-free periods, around 46% of UK consumers that used their credit cards actually had to pay interest on their Christmas shopping last year.
The data, which is obtained from Klarna’s Black Friday and Cyber Monday report, reveals that UK consumers are increasingly seeking greater value alternatives to traditional credits that may give them more control over their finances, like Buy Now, Pay Later (BNPL).
The numbers shared by Fintech Klarna also indicate that BNPL clients are a lot better at planning and budgeting for their Black Friday and holiday shopping.
- Better budgeters: 6 in 10 BNPL consumers have set an overall budget for their holiday shopping, compared with just 42% of those who had never heard of BNPL.
- Proper planners: 6 in 10 BNPL consumers already know what to buy during the Black Friday sales compared with only a third of those who don’t use BNPL.
- Smart shoppers: Half of BNPL consumers wait for Black Friday sales to make larger purchases compared to less than a quarter of people who never heard of BNPL
- Savvy savers: Over half of BNPL consumers research the best deals ahead of time compared with less than a third of those who don’t use BNPL.
A report from international management consultancy, Bain, noted that BNPL saved UK residents around £103 million in interest and fees last year, as they were able to leave behind their credit cards, and overall leads to lower dependence on debt than credit cards.
The average outstanding BNPL balance is about £200 compared with more than £500 for credit cards. And Bain reports that BNPL represented about 5% of total ecommerce activities or £6.4 billion-in purchases last year.
Alex Marsh, Head of Klarna UK, stated:
“This data shows that shoppers are increasingly smart and mindful about their buying decisions. It’s no wonder they are abandoning high-cost credit cards that are designed to obscure spending to drive up debt and interest payments. Helping shoppers plan in advance and budget smartly is baked into Buy Now Pay Later, giving people better control over their finances to save money and keep them out of debt.”
Insights from Klarna’s consumer research, carried out in cooperation with Nepa across 11 different countries (the US, UK, Australia, Germany, Austria, France, Belgium, the Netherlands, Sweden, Norway and Finland).
The research was performed during October and November 2021 and includes a minimum of 1,000 respondents in each country (1092 in the UK). Over 11,000 consumers, in total, participated. The sample sizes are nationally representative and have been selected by research firm Nepa.