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When it\u2019s time to buy, consumers deserve payment options \u2014 and it\u2019s the retailer\u2019s job to make sure they have access to them.\u00a0 But with high interest rates and late fees, credit cards may not always be the right choice for shoppers. A <\/span><\/span><\/span><\/span><\/span><\/span>recent survey<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span> led by <\/span><\/span><\/span><\/span><\/span><\/span>Sezzle<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span> and Retail Dive\u2019s studioID reveals that, for many reasons, consumers are choosing <\/span><\/span><\/span><\/span><\/span><\/span>buy now, pay later (BNPL)<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span> \u2013 also referred to as Pay in 4 \u2013 over credit cards as a fair, affordable payment method. Although the shoppers in our survey have access to other payment options (the majority haven\u2019t been denied access to credit in the last three years), they still seek out BNPL.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Here are five reasons why today\u2019s consumers are leaning more on BNPL and less on credit cards.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Responsible purchasing is the biggest driver of BNPL use. Half of consumers use it for easier budgeting and to ensure cash flow.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n With flexible and predictable repayment schedules, <\/span><\/span><\/span><\/span><\/span><\/span>BNPL is able to provide consumers with greater financial stability as they can match money coming into their accounts with payments<\/span><\/span><\/span><\/span><\/span><\/span>. This ensures that cash is available when needed.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Think of BNPL as another budgeting tool: Consumers can use it to spread out payments so they align with spending patterns and cash flow from week to week or month to month.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n In some cases, consumers can even request to defer a BNPL payment on occasion without penalty. \u201c<\/span><\/span><\/span><\/span><\/span><\/span>Can you imagine asking a big credit card company to help you out by delaying your payment by a few days, with no questions asked? Do you think they would?”<\/span><\/span><\/span><\/span><\/span><\/span> says Nancy Eichler, who joined Sezzle as senior vice president of marketing after spending more than a decade in retail sales leadership.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Using credit cards often means paying interest if you can\u2019t pay the balance in full, or fees when payments are late. <\/span><\/span><\/span><\/span><\/span><\/span>According to Transunion<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span>, the average consumer\u2019s credit card balance rose from $5,795 in January 2023 to $6,295 in January 2024. Since 2010, credit card issuers have increased <\/span><\/span><\/span><\/span><\/span><\/span>credit card late fees<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span> every year, reaching $14 billion in 2022 and representing more than 10% of the $130 billion charged to consumers in interest and fees.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Many BNPL platforms offer consumers zero interest when they make payments on time. It\u2019s no wonder that according to the <\/span><\/span><\/span><\/span><\/span><\/span>survey<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span>, 32% of consumers use BNPL to avoid paying interest while purchasing what they need. Average credit card interest rates hover around 22.63% currently, compared to 0% interest when consumers use Sezzle and make their payments on time. More than 94% of Sezzle users make payments early or on time.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Certain platform features can also help users avoid overlooking their payments. \u201cOne of the things we hear frequently from consumers is how much they appreciate Sezzle\u2019s built-in reminders,\u201d says Eichler. \u201cThey get push notifications, texts, and emails, so they receive multiple forms of communication to minimize forgotten payments that could lead to late fees.\u201d\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Some consumers don\u2019t feel comfortable using credit cards, so they seek out other options. This holds true for nearly one in three (28%) survey respondents who rely on BNPL to avoid using credit cards to eliminate concerns about:<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Credit cards also come with spending limits that are determined by the lender. This amount often remains virtually unchanged.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cWith a credit card, once you pay down your $1,000 limit, you return to that same $1,000 credit limit right away, and sometimes it is tempting to spend more than you can afford,\u201d explains Eichler. \u201cBecause spending limits can change based on circumstances, BNPLs watch a little more closely \u2014 all with the goal of helping consumers better manage their finances. For example, if you struggled to make your last BNPL payment, it\u2019s possible that your spending power could drop temporarily because we don\u2019t want customers to over-extend themselves. The goal is to put parameters in place to facilitate more responsible spending.\u201d\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Because BNPL allows consumers to purchase responsibly, they can select a financing option that works \u2014 and stick to it \u2014 avoiding long-term debt by counting on a structured yet flexible repayment plan. In fact, 27% of respondents use BNPL to do just that.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n The vast majority (87%) of surveyed consumers also say they don\u2019t struggle to make their BNPL payments on time: Instead of making \u201cdesperate\u201d purchases or spending beyond their means, respondents are clearly making a choice to buy now and pay later \u2013 and making it a priority to make payments when they\u2019re due. Interest-free payments and split-payment options available with BNPL help consumers keep debt in check.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n The same may not be true if these consumers had to make credit card payments each month. For example, this <\/span><\/span><\/span><\/span><\/span><\/span>minimum interest payment calculator<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span>1. For Better Budgeting and Cash Flow<\/span><\/span><\/span><\/span><\/span><\/span><\/h4>\n
2. To Avoid Paying Interest<\/span><\/span><\/span><\/span><\/span><\/span><\/h4>\n
3. To Reduce Credit Card Use<\/span><\/span><\/span><\/span><\/span><\/span><\/h4>\n
4. To Avoid Debt Traps<\/span><\/span><\/span><\/span><\/span><\/span><\/h4>\n