Credit card spending wanes as alternative payment options grow

Consumers have reduced the proportion of purchases they charge to credit cards over the past year as their financial stress increased and other payment options—particularly “buy now, pay later” alternatives—grew in popularity, according to the most recent annual survey on credit card satisfaction by consumer research firm J.D. Power, released today.

The company surveyed nearly 28,000 credit card users and found that overall satisfaction with their credit cards improved. However, respondents allotted 42% of their monthly spending to their primary credit cards, down from 47% in 2021 and 50% in 2019. One reason was that the percentage of credit card customers classified as “financially unhealthy” grew from 53% in 2021 to 57% this year. At the same time, 22% of respondents said they are worse off financially in 2022 than the year before—up from 18% in 2021.

Another reason was interest in credit card alternatives. Forty-four percent of respondents said they would consider alternative financing options for large payments, with the most popular option being buy now, pay later services with reasonable fees and competitive interest rates. The survey also found that just 31% of credit card customers feel their frequent purchases completely maximize their rewards earnings.

“Despite recent spikes in travel and spending, cardholders generally have been taking a more cautious stance with credit card spend in the past five years,” said John Cabell, director of banking and payments intelligence at J.D. Power. “They are increasingly turning to other channels such as debit cards, BNPL and even cash. It is going to become critically important for card issuers to improve product value and boost proactive support for a growing segment of financially stressed customers as we move into this next phase of the economic cycle.”