Giving your customers options with interest-free credit

The cost-of-living crisis has impacted many consumers – and it’s taking its toll on retailers too. Consumers appear to be far more cautious with the way they spend and are constantly looking for ways to make their money go further.

This approach to spending is highlighted in our latest consumer research. 41% of UK adults told us they’d spent less on non-essential items in the last six months (Jan – Jun). While two-thirds (68%) said they’re nervous about spending too much without knowing the full extent of the cost-of-living increases.

Price rises in fuel, groceries, transport and energy are pushing consumers to reassess their budgets and evaluate what essential purchases are. Some could be questioning how they might pay for necessity purchases – like a replacement washing machine or new boiler – to keep their household running.

Using finance options to pay for these large necessity purchases could be a way to spread the cost in a manageable way. But as consumers tighten their purse strings, committing to a large outlay could be a tough decision to make.

Helping reduce the strain on consumer budgets

Retailers must be mindful of the new approach consumers are taking to spending. They also need to consider ways they can help them to obtain their purchase, despite financial restraints – as a third (32%) of adults said they were considering making a high-value purchase of £500 or more in the next 12 months.

By offering interest-free credit as a retail finance option, consumers could be given the opportunity to spread the cost of their purchase over a fixed time with equal monthly payments. And with no interest, they don’t have to worry about paying extra for that must-have purchase. 

Our research shows this form of payment option is already proving popular. 44% of respondents said the last time they used retail finance to pay for a high-value item, they chose an interest-free credit agreement. While 38% would consider interest-free credit to make large purchases of £500 or more in the near future.

Why interest-free credit?

In today’s economic climate, interest-free credit provides consumers with more convenience and flexibility – allowing them to budget for a monthly expense, without having to pay everything upfront. Costly, essential items, like a new washing machine, can then become budget-friendly purchases.

A quarter (26%) of our survey respondents felt that paying no interest on a high-value item would make them more likely to buy it, with 30% saying they’d be likely to spend more money than they’d originally intended.

Richard Brassey, Head of Business Partnerships comments:

“When offering interest-free credit to customers, retailers are providing some reassurance that they won’t be paying more for an item at a time when costs are surging. But they must be responsible in offering this option – making clear the obligations consumers have when using it and ensuring they’re aware of the implications if they’re unable to stick to repayments.“

As we wait to uncover the full extent of the cost-of-living increases, interest-free credit could provide a budget-friendly solution that consumers can use now. In fact, 41% of consumers said that having a 0% interest agreement with fixed monthly payments would make high-value items much more affordable to them at the moment.

Finding the right finance partner

For many retailers, offering this type of finance agreement could help give their customers options when it comes to how they pay for those larger items. And with consumers saying the main benefits of using interest-free credit are:

• Paying no interest (52%)
• Helps spread the cost over a set period of time (43%)
• It makes paying for high-value items more affordable (32%)
• The convenience and flexibility of buying what I need with no additional cost (30%)
• I can set monthly amounts to pay for a purchase (28%)

It could be a win-win for all, if done responsibly. At Barclays Partner Finance, we pride ourselves on delivering great customer experiences. With our data-rich insights, we can help retailers understand more about the needs of their customers and adjust to the economic climate.

“We’ve all felt the pinch of cost increases recently. As consumers think more carefully about their spending, it’s vital that retailers react and offer them a simple, secure and cost-effective way to make essential purchases. An interest-free credit finance option provides a clear payment structure that consumers can work with to ensure there’s no unnecessary strain on their day-to-day budget.” - Richard Brassey, Head of Business Partnerships, Barclays Partner Finance

References

Consumer research carried out by YouGov Plc between 28 and 29 June 2022 on behalf of Barclays Partner Finance. The sample size was 2,125 adults providing a representative of all UK adults (aged 18+). Fieldwork was conducted online.