Digital Transactions reported on a JD Power Study that found the use of credit cards to be declining despite consumers satisfaction with the service that credit card issuers. Since the first quarter of 2020, debit card dollars spent was greater than that of credit for the first time, although that is beginning to shift back with the return of travel purchases. JD Power suggests that part of the reason for the decline in reliance on credit cards may be the availability of BNPL options.
BNPL, or “buy now, pay later,” is a popular payment option that is becoming increasingly available at online and brick-and-mortar stores. With BNPL, you can purchase an item and spread the cost out over a set period of time, usually interest-free. This can be a great option for big-ticket items that you may not be able to afford all at once. It’s also worth noting that some BNPL providers offer additional perks, such as rewards points or cash back.
Here’s an excerpt from the Digital Transactions article:
Overall, credit card holders are allotting 42% of their monthly spending to their primary credit cards, down from 47% in 2021 and 2020, and down from 50% from 2019. That decline comes in spite of a year-over-year rise of five points, to 810, in J.D. Power’s consumer-satisfaction score for credit cards. Improvements by card issuers in service, more favorable credit card terms, and mobile and communication factors/subfactors are key reasons for the increase in satisfaction, the study says. J.D. Power’s scores are based on a 1,000-point scale.
One culprit for the decrease in card spending, the study says, is buy now, pay later loans, which offer consumers an alternative, and more flexible, financing method for purchases than credit cards.
One advantage of BNPL loans is that consumers can pay for purchases over a preset number of interest-free installments, which increases their purchase volumes. Indeed, 44% of credit card customers say they would consider other financing options, such as BNPL, flexible financing/installment loans, or personal loans when making large purchases, the study says. Of those payment options, BNPL is the most popular, with 28% of consumers saying they would consider a BNPL loan when making a large purchase. Reasonable fees and competitive interest rates are other factors helping drive consumer consideration of BNPL loans, J.D. Power says.
This may be an opportunity for increased debit card use. Debit cards are often the payment of choice for consumers when they set up a payment source for the BNPL re-payment transactions. It’s something that debit issuer may want to encourage their debit cardholders using BNPL to consider.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group