While consumers are increasingly shopping online after the Covid-19-induces lockdown, they are getting stung by unexpected fees on credit cards and the rolling over debt month to month, Klarna’s Shopping and Money Management trend report found.
Klarna’s quarterly global Pulse reports underline consumers’ difficulty to understand the costs of using “traditional” payment methods, such as credit cards, and their overall shopping and money management behaviour.
The majority of UK consumers – 66% – own at least one credit card, with 23% of them using it as their main card for purchases and 43% for emergencies or sporadic high ticket purchases. Indeed, the trend towards online shopping under lockdown looks set to stay. In the UK almost half of the consumers shop online at least once a week, up 26% from Q1, leading to a shift away from cash and towards credit and debit cards, and other alternative payment methods.
However, of 10,000 consumers which were surveyed, almost 59% would rather go to the dentist or do household chores than read their credit card’s fine print or work out the cost of its APR. Surprisingly, this is particularly true for those with a high interest in personal finance.
With the shift towards online shopping continuing, the challenges consumers face when it comes to using credit cards continue to escalate. Over 26% of Brits do not know how much interest their credit card charges, 15% only pay off the minimum amount each month and 23% have incurred unexpected credit card costs.
When it comes to payment preferences, a quarter of UK consumers prefer BNPL services, enabling them to defer payments or pay in instalments. The key reason being that they want to offset the risks of online shopping – which is set to increase in the future. In fact, more than 6 in 10 of those who use BNPL said that the main benefit of paying after delivery is to be able to check a product before paying, while 45% of BNPL users said paying only for the products they keep was one of the main benefits.
Commenting on the research, Klarna UK head Alex Marsh said, “It’s clear that over a year of restrictions has caused a shift in consumer behaviour which looks set to stay, with online shopping continuing to rise. As a consequence consumers have also shifted their payment preferences to match their lifestyles.
“The research has shown that while many consumers own credit cards, they are increasingly getting stung by a lack of understanding of how they work, unexpected fees, and the danger of rolling over debt month to month. On the contrary, UK consumers using services like Klarna’s benefited from additional flexibility at no extra cost, saving £76m in credit card interest last year alone.”
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