"Buy now, pay later helped fuel record holiday spending online, surging 14% year over year, but now that those bills are coming due, consumers aren’t sure how they’ll pay them"

"Buy now, pay later helped fuel record holiday spending online, surging 14% year over year, but now that those bills are coming due, consumers aren’t sure how they’ll pay them," per CNBC.


In an era defined by persistent inflation and unprecedented interest rates, the "buy now, pay later" (BNPL) service played a significant role in propelling online spending to a staggering $222 billion from November 1 to the end of December. During this period, BNPL usage reached an all-time high, surging by 14% compared to the previous year and contributing $16.6 billion to online expenditures. Cyber Monday witnessed a remarkable spike of nearly 43% in BNPL utilization, according to Adobe.

The surge in BNPL adoption occurs against the backdrop of soaring credit card debt, hitting record highs, and a doubling of delinquency rates over the past two years. While BNPL delinquency rates remain undisclosed by service providers such as Klarna, PayPal, and Affirm, concerns linger about this opaque financial phenomenon. Affirm, for instance, emphasizes the short-term and high-velocity nature of its BNPL service, making traditional credit metrics less relevant. Despite this, the lack of transparency has led to a "phantom debt" phenomenon, raising apprehensions among economists, regulators, and consumers about its potential economic impact.

Financial coaches, like Alaina Fingal, observe an increasing number of individuals seeking assistance in managing finances due to overspending during the holidays, often resorting to multiple credit options, including BNPL services. While BNPL may offer convenience, critics argue that it can contribute to a cycle of debt, particularly when users struggle to make minimum payments, impacting their ability to cover essential expenses.

The broader public sentiment on BNPL remains divided, with some expressing gratitude for its accessibility, enabling holiday gift purchases, while others deem it "dangerous" and commit to discontinuing its use as a New Year's resolution. As the popularity of BNPL grows, its impact on consumers and the broader economy continues to be a subject of debate.