Could Christmas be the death knell for credit card payments?

A recent report by Klarna has found that one in two UK consumers are planning to discard their credit card entirely for Christmas shopping this year.

According to Black Friday and Cyber Monday report, this may be partially driven by the fact that up to two-thirds of credit card owners want to avoid paying credit card interest, with 46% stating they ended up paying interest on their Christmas shopping last year.

The report gathered insights from Klarna’s consumer research that was conducted in cooperation with Nepa across the US, the UK, Austria, France, Germany, Belgium, the Netherlands, Norway, Sweden and Finland. The research was conducted during October and November this year and included a minimum of 1,000 respondents in each country.

Klarna found that UK consumers were increasingly looking for ‘better value’ alternatives to traditional credit that could give them more autonomy over their finances, such as buy now, pay later (BNPL).

Figures from the report detailed that BNPL consumers were found to be much better at budgeting and planning for their holiday shopping, with 6 in 10 BNPL consumers having an overall budget set for their holiday shopping, compared to 42% of those who had never heard of BNPL.

Meanwhile, 6 in 10 BNPL consumers already know what to buy during the Black Friday sales, compared to only a third who don’t use BNPL, while half of BNPL consumers said they wait for Black Friday sales to make larger purchases compared to less than a quarter of those who are unaware of BNPL, and another half of BNPL consumers said they researched the best deals ahead of time compared to those who don’t use BNPL.

Klarna UK head Alex Marsh said, “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.”

The issue of credit card interest is a big problem for the industry. Recently, Amazon issued a notice to its customers that it will stop accepting Visa credit cards issued in the UK from 19th January 2022, citing the high fees charged for transactions.

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