U.S. shoppers are expected to spend a staggering $18.5 billion using third-party buy now, pay later (BNPL) services during the holiday shopping season, according to new projections from Adobe Analytics. This figure represents an 11.4% increase compared to last year, highlighting a growing reliance on BNPL options as consumers navigate rising debt levels.
BNPL services allow shoppers to spread their payments over time, typically in four-installment plans, although some options extend up to 36 months. With the overall holiday spending forecast to reach approximately $240.8 billion—an 8.4% increase—BNPL spending is set to outpace traditional spending growth, signifying a shift in consumer behavior as the holiday season approaches.
Prominent BNPL providers like Klarna, Afterpay, and Affirm are expected to capture a significant portion of the market, particularly among purchases of electronics and beauty products. The convenience of BNPL can be appealing during the gift-giving season, especially when many consumers are eager to increase their purchasing power despite financial constraints.
However, consumer advocates are cautioning about the potential pitfalls of using credit cards for BNPL purchases. Delicia Hand, senior director at Consumer Reports, warns that shoppers who use credit cards to cover BNPL installments risk entering a cycle of debt. If balances aren’t paid off in full each month, consumers may face additional interest charges on top of BNPL fees, exacerbating their financial burden.
Recent data from the Federal Deposit Insurance Corporation (FDIC) indicates that U.S. lenders’ net charge-off rates for credit cards reached 4.82% in the second quarter—an alarming high not seen since 2011. The New York Fed’s Survey of Consumer Expectations shows that 13.6% of consumers believe they could fall behind on loans in the next three months, a significant concern especially among those with annual incomes under $50,000, where the figure climbs to 19.5%.
Despite these risks, the Financial Technology Association reports that nearly 10% of BNPL purchases are made using credit cards and other payment methods, suggesting that a notable number of shoppers are intertwining credit card debt with BNPL services. The association claims that its members maintain delinquency rates of less than 2% for BNPL transactions, underscoring the potential for responsible use of these services.
As the holiday shopping period draws near, the trend towards BNPL continues to raise important questions about consumer debt and financial health, making it essential for shoppers to approach these options with caution.
