Shoppers are spending again, but they are finding new ways to pay for their purchases, in order to stretch their paychecks. A new survey from PayPal has found that credit card rewards are increasingly seen as an equal alternative to cash by shoppers, although some are still unaware of the spending balance that’s available to them.
PayPal commissioned a survey of 1,543 American credit card users, all of whom are enrolled in at least one rewards program. Yet of those surveyed, 39% were unaware of their rewards bonuses, suggesting that there is a significant opportunity for increased spending power – and increased retail sales.
Credit cards have come under scrutiny in recent years, particular by younger demographics, who are concerned about falling into debt. It is frequently reported that only a third of millennials owns a credit card, instead choosing to utilize payment plans or pay with a debit card. But the unexpected financial consequences of the pandemic has seen many consumers looking for alternative ways to pay for their items.
“More and more people across the country are turning to their credit card rewards as a helpful and easy way to make their dollars go further and, in the current environment, two-thirds of Americans now view these rewards balances as a way to buy the things they need such as groceries and other essentials,” said Jill Cress, VP of consumer marketing at PayPal.
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The survey found that 34% of consumers believe rewards are useful in purchasing clothing, in addition to groceries (40%) and gift cards (37%). While the most popular items in April were tied to pandemic-related precautions, such as cleaning products and toilet paper, there is an expectation that this priority will shift as the coronavirus is contained and people resume their usual, everyday activities.
However, one shift in spending that is expected to be long term is the new emphasis on supporting the community. Since the outbreak began, PayPay reported that 74% of credit card-owning consumers were making an active effort to shop at locally owned small businesses, and 24% said they would spend their rewards at a small business if they needed to use them before they expired.
“With travel and luxury items still less of a priority for many right now, our research shows that people are instead tapping into their rewards balances to support small businesses in their community and to give back to causes,” said Cress.
There has also been a growing interest in charitable giving among 49% of respondents, which experts attribute to the calls for support in funding PPE and closed businesses. Additionally, the current national conversation on racial equality has sparked growing interest in supporting social justice organizations.
While not applicable for all rewards programs, the PayPal “Pay With Rewards” program enables users to donate their rewards balances to charitable causes through the PayPal Giving Fund.