Just as credit products evolve, so do the ways consumers use them. Embedded finance has made personal loans more accessible, and consumers and merchants alike have popularized buy now, pay later (BNPL) options. These newer credit products are changing how consumers manage their finances and make purchasing decisions. Most consumers now use credit to buy groceries, data shows, demonstrating these credit products’ transformational impact on daily spending habits.
This report will provide a detailed examination of these changes, analyzing consumer preferences and motivations behind their credit choices. The report will detail:
- The factors that drive consumers’ choices of preferred credit products, including rewards programs, familiarity with a product, and trust in the provider.
- The widespread use of credit for essential expenses, particularly groceries.
- The motivations behind consumers’ use of different credit products, including credit cards, personal loans and BNPL.
In this edition
Rewards, Familiarity and Trust Drive Consumers’ Credit Product Preferences
A larger menu of choices greets consumers considering credit usage. For example, embedded finance has improved personal loan accessibility within the application experience. BNPL has found appreciation from consumers as well as the merchants they purchase from. Banks, card networks, FinTechs and other financial services companies would do well to understand how these relatively new credit options affect consumers’ consideration when they opt to use credit.
The reasons consumers choose a given credit product over other options vary considerably by specific product. For instance, consumers’ most common reason for choosing credit cards for both essential and nonessential purchases is rewards. Thirty-five percent of consumers using credit cards for essential expenses said they chose the product to accumulate better rewards. Thirty-seven percent paying for nonessential expenses with credit cards said the same.
Meanwhile, the greatest share of BNPL users reported choosing that option because of their familiarity with it. Forty-one percent of those using BNPL for essential expenses went with BNPL because they were familiar with it. Forty-seven percent of those using it for nonessential expenses said the same.
For those using personal loans to pay for necessities, trust is the most popular concern. For nonessential purchases, personal loan users’ rationale is more similar to that of BNPL users. The greatest share — 29% — cited familiarity as their reason for choosing personal loans to pay for optional expenses.
Other factors also enter the equation when consumers choose a given credit product over another. For instance, 28% of those who tapped BNPL to pay for essential expenses said they did so because they were offered BNPL at the point of purchase or payment. This share is more than three times the share that said the same of any other method.
Nonessential purchases follow different patterns. For these expenses, 23% of those choosing personal loans did so because they were offered financing at the moment of purchase or payment. Yet only 13% of those choosing BNPL for nonessential purchases did so for this reason.
Consumers leveraging BNPL were more likely than those choosing other products to be motivated by speedy access to funds. That trend held for essential and nonessential purchases. Credit card users were more likely to be motivated by fraud protection, regardless of purchase type.
More Than Half of Consumers Use Credit to Purchase Groceries
Consumers most commonly use credit products to pay for small, day-to-day expenses such as groceries, dining out or clothing. In fact, the majority of consumers — 52% — reported having used credit products to purchase groceries in the previous 90 days. This share is greater than said the same of any other type of purchase.
The second-most common credit purchase is food from restaurants. Forty percent of those surveyed reported having used credit products to purchase food from restaurants in the previous 90 days. The third-most common category is another necessity, clothing and accessories. Thirty-six percent of consumers said they had made such purchases using any type of credit product in the same timeframe.
It’s not all common purchases, of course. A considerable share of consumers are also using credit for big-ticket purchases. For instance, 16% had used credit products to purchase household furnishings in the previous 90 days. Plus, 15% had used credit to buy consumer electronics in that period, and the same share had done so to buy appliances.
Consumers Use Credit Cards Out of Convenience, Loans Out of Necessity
The most common reason consumers reported for using credit products to pay for essentials is convenience. The second-most popular motivator is the ability to earn rewards or cash back. Credit card users especially cited these as key advantages. Namely, 46% of consumers who use credit cards for essential purchases listed convenience as a reason for doing so. Plus, 45% included the ability to accumulate rewards or cash back as a reason.
Meanwhile, those who use personal loans to pay for necessities were more likely than those using credit cards or BNPL to say they did so because they needed to. Nearly one-third of those purchasing necessities using personal loans reported doing so because they could not afford to without credit.
BNPL users, meanwhile, were likelier than those using other forms of credit to leverage the method to make higher-value purchases. Thirty-six percent of consumers using BNPL to buy necessities reported doing in order to make a larger purchase or payment. For nonessential purchases, BNPL users are also the likeliest to be motivated by the need to preserve their cash cushion.
When it comes to nonessential purchases, similar patterns emerge. Credit card users are more likely than those leveraging other forms of credit to be motivated by convenience and rewards. Personal loan users are the most likely to be using credit because they could not afford the expenses otherwise. BNPL users are more likely to leverage the payment method than other credit users specifically to make larger purchases.
Conclusion
This MonitorEdge report explores a significant shift in consumer credit usage, driven by the rise of embedded finance and BNPL options. Consumers are increasingly relying on credit for both everyday necessities like groceries and larger purchases. While rewards programs strongly influence credit card usage, familiarity drives BNPL adoption, and trust plays a key role in personal loan decisions, particularly for essential expenses. These findings illustrate the evolving credit landscape and shed light on the diverse motivations behind consumer choices.
Read More
The Consumer Credit Economy MonitorEdge series delves into PYMNTS Intelligence research to uncover how consumers are using credit. To stay up to date, subscribe to our newsletters and read our recent data reports digging into credit trends.
