Poll: Holiday shoppers rack up debt using 'buy now, pay later' services

Shoppers walk through Macy's in Herald Square on Black Friday in New York City.  Photo by John Angelillo/UPI
1 of 2 | Shoppers walk through Macy's in Herald Square on Black Friday in New York City.  Photo by John Angelillo/UPI | License Photo

Nov. 29 (UPI) -- More Americans are turning to "buy now, pay later" options for their holiday shopping this year -- opting to choose debt rather than pay for gifts outright, a new study found.

Companies such as Affirm, Afterpay, Klarna, Quadpay and Sezzle allow shoppers to pay for their purchases in a series of installments, which are typically free of interest, unlike loans or credit card debt.


Of such services, also known as BNPL firms, Klarna has seen the largest increase in aggregate spending leading into the holiday season, according to the study released Nov. 22 by the consumer data research firm Cardify.

Klarna, which was founded in Sweden in 2005, has more than 90 million active consumers using its services with about 2 million purchases made through the company per day, according to its website.

The Cardify study found BNPL shoppers were willing to spend more than last year during the holidays compared to those who do not use such services.


"While jingle bells will ring in the short term, it's unclear how BNPL brands and holiday shoppers will handle walking into 2022 with a potential hangover of debt," the study reads.

The survey of 2,000 verified BNPL shoppers found 45% said that they will pay for at least some of their holiday gifts through such payment plans.

Of the respondents surveyed, Cardify noted that 65.7% would choose paying for some of their gifts with debit cards, while 54.6% would opt for credit cards. Only 31.5% of those surveyed said they would prefer to pay for their gifts with cash.

Cardify found that 8.6% of respondents would even choose to pay for their entire holiday haul through BNPL services.

The study found that 10.8% of respondents acknowledged having defaulted on past BNPL payments. A study from the financial website Credit Karma found in September that 34% of people who have used such services in the past had fallen behind on one or more payments.

BNPL providers such as Klarna have received criticism for potentially encouraging consumers to spend more than they can afford -- even earning comparisons to payday loan firms.

A study conducted by Debt Hammer found that as many as 58% of consumers expect to take out a payday loan ahead of the holidays -- while 66% of Americans would use BNPL services.


About 48% of respondents to the Cardify survey said they would be forced to spend less if BNPL was not an option, most likely on smaller ticket items.

The Credit Karma survey found that the BNPL services were most commonly used for high-price items such as home goods and furniture, as well as electronics.

That survey found that 49% of Gen Z consumers were most likely to use BNPL services for products up to $100 while 56% of Baby Boomers were most likely to use such services for purchases above $500. Millennials and Gen X consumers were most likely to use such services for goods between $100and $500.

"Despite the potential downsides, most respondents who have used a buy now, pay later product have used them more than once, indicating consumers are satisfied with the purchase experience," the Credit Karma study reads.

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