Comment: What does the increase in interest rates mean for interest free credit?
Yesterday’s news from The Bank of England raising interest rates by 3% will have a huge impact on consumers, especially as costs continue to rise and disposable incomes dwindle. As credit becomes more expensive, should merchants offer 0% interest credit products like Buy Now, Pay Later?
Todd Latham, CEO of Divido said: “Yesterday’s interest rate hike to 3% will have a huge impact on consumers, particularly in the context of rising costs and dwindling disposable incomes. With the cost of credit now more expensive, there is a big opportunity for retailers to consider different repayment options that best suit their customers and ultimately, protect their bottom line.
“Buy Now Pay Later (BNPL) and Short-term Interest-free credit (STIFC), which charge 0% interest on transactions, is increasingly becoming a more attractive offer to consumers. While it is by no means a solution to rising consumer debt, it can provide respite for people needing to buy big ticket items in a high interest environment, without paying interest. Retailers, who pay a small transactionfee, can increase the average order value, and decrease cart abandonment, which will be crucial to help them grow in the face of choppy economic headwinds.”