Holiday Shopping Could leave More Than Half Of Americans in Debt

• As shoppers spread out their shopping amid growing concerns about shipping delays and the Omicron Covid variant, more American consumers are turning to “buy now, pay later (BNPL)” services to finance their purchases.
• Yet studies show that access to BNLP encourage consumers to spend more than they can afford.
• According to a recent survey, a many as 56% of shoppers have made purchases with “buy now, pay later” services they can’t afford to pay off.

The prices of consumer goods are high with inflation as it’s highest in 3 decades. This has made holiday shopping more expensive when compared to the pre-pandemic season in 2019. As a result, Americans have less to spend on holiday meals, gifts and travels with good number of them not being able to fully fund their shopping this holiday.

Overall in-store and online spending on Thanksgiving Day and Black Friday were slightly lower from a year ago, despite 2020 being marred by Covid 19 challenges. However, it is believed that low figures on Black Friday and Thanksgiving Day were because most American shoppers started their holiday shopping earlier in an attempt to defeat product shortages caused by shipping delays and supply chain setbacks.

All in all, American consumers plan to spend $998 on average on holiday shopping this year, according to data from a National Retail Federation (NRF) survey. This is a drop from the $1.047 pre-pandemic high recorded in2019.

According to a report by Cardify, 45% of shoppers are planning o use “buy now, pay later (BNLP)” services to finance their holiday expenses for the first time. This was from the results of a poll that involved more than 2,000 American adults.

Derrick Fung, CEO of Cardify said that taking out loans facilities such as Christmas pay day loans and BNLP to finance holiday shopping is becoming more and more mainstream among American shoppers. He said:

“It’s become more mainstream. The consumer over the last 12 months has become more compulsive and BNPL products are the result of us being locked up for too long and wanting more instant gratification.”

BNPL financial products allow borrowers to spit the cost of their holiday purchases into equal installment payments, similar to those for installment loans but often interest-free and these are usually due every fortnight. BNPL loans make even the priciest of items appear affordable and the cheapest items appear almost negligible.

However, it has been found that BNPL financing services encourage shoppers to overspend with approximately 46% of the surveyed shoppers admitting that they would spend less if they didn’t have BNPL as an option, Cardify found.

As such, consumer are always advised to look out for the catch and where the extra charges can emanate from which may make it hard for them to repay the loans hence moving deeper into debt. For example, a missed payment could result in an array of fees such as late fees, deferred interest rates, and other penalties depending on the service provider.