New data has revealed that not only is Gen Z not using credit cards, they’re actively afraid. But can we blame them, asks Rich Bayer
For decades, credit cards have been a preferred payment method for consumers. But there is an interesting development going on in the world of everyday borrowing. It seems that credit cards are giving Gen Z the ‘ick’.
According to our new survey data, credit cards are not just falling out of fashion amongst this younger generation of shoppers, they are actively making them nervous. Nearly seven in 10 said that credit card bills make them anxious or stressed.
Nearly three in five Gen Z consumers who have owned a credit card have cancelled them in favour of alternative options. They do not even appear to be interested in using them to get a good credit score. While more than a third of them obtained credit cards to build their credit history, a mere nine per cent prefer to use them to pay for their purchases.
But is it any wonder? The traditional credit industry is designed to serve banks and credit card providers at the expense of everyday consumers, especially as credit card interest rates have risen. According to Bank of England data, the average UK credit card interest rate was 24.65 per cent in January 2025, the highest the rate has been in more than 30 years. More than two in five Gen Z credit card users say they are regularly surprised by the amount of interest they are charged each month.
What are Gen Z using instead of credit cards?
So, if Gen Z are calling time on credit cards, what method of borrowing are they turning to instead? The evidence tells us they are turning to Buy Now, Pay Later (BNPL) services. Among BNPL users, Gen Z users turn to the services more frequently than older generations and more than half of all Gen Z are interested in using BNPL in the future.
It’s clear that they want to move away from burdensome high-interest payments to something that allows them to manage their money and spread the cost of purchases in a way that does not put them at risk of revolving debt. At Clearpay, for example, purchases are paid over four instalments in six weeks, interest free. Late fees are capped at £24 (or 25 per cent, whichever is lower) and if a single payment is missed, the account is suspended until payments are up to date. Unlike credit card providers which profit from debt, Clearpay only benefits when customers pay on time.
The high street could benefit from BNPL
This trend could significantly benefit businesses and the wider UK economy. Retailers that offer BNPL alongside traditional payment methods have long reported that it helps bring in new customers and increased sales.
With regulation due in 2026, this will help build consumer trust further and will give them greater confidence in the safety of these products. In a particularly interesting development, they could also give a much-needed boost to the high street. Our survey found that four in 10 customers would shop in-store more often if BNPL options were available.
There is a misconception that people use BNPL on frivolous non-essentials that they cannot afford or do not need. In reality, 96 per cent of Clearpay transactions are paid on time globally, indicating that they are using our service to manage their payments. When we asked Gen Z what products they would consider buying with BNPL once it is regulated, their top four answers indicate that they would invest in necessary items: furniture, technology, white goods and cars.
Following their Millennial predecessors, who were the early adopters of BNPL, the Gen Z generation is now continuing to drive a genuine transformational shift in how consumers borrow money. Businesses that understand the driving force behind their modern shopping habits will reap the rewards.
Rich Bayer is the CEO of Clearpay