Credit Card Confusion: Clearpay Launches New Report Calling For More Transparency In The Sector

  • Credit Cards
  • 30.11.2021 02:40 pm

Two in five Brits are confused about credit scores, 62% are anxious about interest or fees and nearly half are concerned about how credit card debt or credit checks will impact their future

Following last month’s publication of the government’s consultation to regulate “Buy Now, Pay Later”, Clearpay, the leader in "BNPL" payments known as Afterpay (ASX:APT) outside the UK and Europe, has launched a new report to uncover consumer concerns around credit products in the financial sector. 

The ‘Consumer Voices’ report, commissioned to get insight into Brits’ understanding of how credit products work, revealed that there is a lack of clarity around credit cards, and associated fees and debt - echoing many of the themes outlined in the consultation.  

Clearpay believes that although regulation is required, a line needs to be drawn between BNPL and credit cards to ensure there is a clear distinction for consumers. BNPL does not operate in the same way as traditional credit, so it should not be regulated using rules created specifically for credit cards in the 1970s. 

Credit cards are confusing

With two in five (40%) Brits admitting they are confused about credit scores, the research reveals that this stems from how credit cards work: 

  • Nearly half (47%) worry about how credit card debt or credit checks will impact them in the future;
  • 36% worry about forgetting credit card payments; 
  • Nearly two thirds (62%) are anxious about credit card interest or fees; 
  • 50% believe that credit card payments come with unexpected charges. 

In relation to financial protections, consumers value transparency on the total cost of the purchase including interest rates at different repayment rates (87%), fee-free early repayments (85%) and spending caps (81%) rather than credit scores and upfront payments.

BNPL emerges as a budgeting tool

In contrast to traditional credit cards, the research reveals that BNPL providers like Clearpay are offering a product that suits consumers’ spending needs. Consumers feel that BNPL services help them budget their monthly outgoings (47%), with over three-quarters (77%) of 18-34 year olds saying they would be more willing to sign up for a BNPL service, like Clearpay, that doesn’t charge interest. 

Unlike credit cards, Clearpay displays a late fees disclaimer at checkout before a transaction is completed and does not report to credit agencies or impact credit ratings. In addition, spending limits only increase as positive repayment behaviour is demonstrated.

BNPL provides an opportunity for small, local businesses
The research also highlights the potential growth opportunity for small businesses if the appropriate payment methods are in place. More than three in five (61%) consumers say they would shop more frequently at local businesses if those businesses offered flexible payment options, such as BNPL.

Damian Kassabgi, executive vice president for public policy at Clearpay says, “As more and more payment providers offer ‘Buy Now, Pay Later’ services, it’s clear that the industry needs fit-for-purpose regulation that will offer consumers protection without stifling innovation. This is increasingly important given BNPL spend has grown by 300%, compared to stagnation for credit cards. 

Clearpay’s view has always been that consumers will be best served by transparent products designed with strong safeguards and oversight from the FCA. Since our entry to the UK two years ago, we have made sure our consumer protections are at the core of our product offering, going above and beyond many of the measures announced by the Government.

Clearpay user, Ema lives in Kings Cross, London. She is 49 and a single mum. She says, “Earlier this year, I moved from a one bed flat to a two bed and I needed to buy furniture. I had the money, but I wanted to spread out the payments, without earning interest. Using Clearpay helped me manage payments and  meant that I could furnish my new flat while also paying the regular outgoing bills too.”

Ivan, mid-20s,  lives in Salisbury and works a full-time job, he says, “I have two credit cards. Both of them with a £1,000 limit…sometimes they’re useful but it depends on what APR you’ve got on them. You need to be really careful with them because if you don’t know how to keep in budget and someone gives you literally £2,000 like this, you might spend all of it and end up in really big debt. I’m not worried about me because I know how my finances work really well.” 

Andrew is a freelance sports blogger in his mid-40s and lives in Hinckley, he says, “When you’re coming up to the holiday period and you need to buy presents for your kids…it can be a very expensive time of year for parents so when you’ve got an option to pay for things, especially when it’s an interest-free option, so you can break down those payments over a month, two months... whatever it takes, then I think that’s a really good thing…” 

Clearpay is transforming the way customers pay for products with purchases spread over four instalments, always interest-free. The service is completely free for customers who pay on time – helping people spend responsibly without incurring interest, fees or extended debt. Late fees apply for late payment instalments.

Click here to find out more about Clearpay.

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