Klarna has released its quarterly shopping and money management report which has found that over a quarter of UK consumers don’t know what their credit interest rates are.
The buy now, pay later (BNPL) brand’s Pulse report underlines consumers difficulty to understand the costs of using traditional payment methods such as credit cards.
Almost half of UK consumers shop online at least once a week, up 26 per cent from Q1 which signifies a shift away from cash and towards credit and debit payments.
As the shift towards ecommerce continues, Klarna’s research shows that 26 per cent of Brits don’t know how much interest their credit provider charges.
The study also found that 15 per cent of shoppers only pay off the minimum amount every month and 23 per cent have incurred unexpected credit card costs.
Over half of UK consumers (66 per cent) own at least one credit card, 23 per cent of which use it as their primary method of payment.
Klarna say that almost two thirds of shoppers (59 per cent) would rather do household chores than read the small print on their credit agreement or work out the cost of its APR.
Over a quarter of shoppers have used a BNPL scheme to deter a payment or pay in instalments, saying that they use it to offset the risks of online shopping, with four in 10 saying they feel online shopping can pose risks.
The research discovered that while 85 per cent of UK consumers have heard of BNPL schemes, only 26 per cent have chosen to use one, which Klarna believes is down to the confusion surrounding how they work.
“It’s clear that over a year of restrictions has caused a shift in consumer behaviour which looks set to stay, with online shopping continuing to rise,” Klarna senior commercial director Alex Marsh said.
“As a consequence consumers have also shifted their payment preferences to match their lifestyles. The research has shown that while many consumers own credit cards, they are increasingly getting stung by a lack of understanding of how they work, unexpected fees, and the danger of rolling over debt month to month.
“On the contrary, UK consumers using services like Klarna’s benefited from additional flexibility at no extra cost, saving £76m in credit card interest last year alone.”