MW 'We fear people will end up in financial trouble.' Americans will spend a record $20 billion via buy-now-pay-later during the holidays.

By Weston Blasi

Record spending on Black Friday and Cyber Monday was partly due to historic use of buy-now-pay-later options

The financial strain Americans are facing is written all over their buy-now-pay-later bills.

Holiday spending hit an all-time-high on Black Friday and Cyber Monday - thanks in part to the number of people who used buy-now-pay-later options.

Americans spent $1.03 billion on Cyber Monday alone using buy-now-pay-later services like Klarna $(KLAR)$, Affirm (AFRM) and PayPal (PYPL) - an all-time high, according to new data from Adobe - and that figure is expected to go even higher. Over the course of the Nov. 1-Dec. 31 holiday shopping season, buy-now-pay-later is expected to facilitate $20.2 billion worth of payments, a year-over-year increase of 11%, per Adobe $(ADBE)$.

Colloquially known as BNPL, these services are a type of short-term loan that lets shoppers pay for products in installments over a set period. According to a November Adobe survey of more than 1,000 U.S. consumers, respondents reported that electronics, apparel, toys and furniture were the categories where they were most likely to utilize BNPL services.

And while a lot of holiday spending likely falls into the category of "wants" rather than "needs," the full picture on BNPL is more complicated. Some experts are concerned that this could be the latest sign of how financially strained shoppers are right now.

More Americans are relying on buy-now-pay-later services because they can't afford certain purchases otherwise, according to the Federal Reserve's 2024 Economic Well-Being of U.S. Households survey. While most BNPL users cited the ability to spread out payments or convenience as their reasons for using this option, 58% said they did so because it was the only way to afford the purchase - an increase from 55% who said the same the previous year.

Using buy-now-pay later options to pay for a big purchase is not inherently bad. These plans are often interest-free in the short term (if paid on time) and provide consumers a similar experience to using a credit card. "When you layer in economic struggles, BNPL can seem like the perfect solution for a holiday," said Teresa Murray, consumer-watchdog director at the U.S. Public Interest Research Group.

But the plans can surprise shoppers with high interest rates, with APRs of anywhere between 9.99% and 35.99%, along with late fees if payments are missed or stretch beyond the designated window. "A lot of people get into a BNPL transaction without realizing the ramifications," Murray said.

People are also using buy-now-pay-later for smaller transactions - like daily essentials - versus saving them for bigger purchases, which suggests that many people are at risk of getting in over their heads. "People are using these transactions for small items - wants, not needs," Murray said, "and not realizing how [many] loans they are getting into. It's easy to lose track of all your BNPLs."

Chuck Bell, programs director at Consumer Reports, agreed. "It can be a warning sign," he said, "and it raises a question [of] if it's going to catch up with you at some point. You may be living pretty close to the edge."

He also noted that when people stack up these loans, various payments may have different due dates, which increases the risk of missing some.

'We fear people will end up in financial trouble.'Teresa Murray, consumer-watchdog director at the U.S. Public Interest Research Group

The increase in the use of buy-now-pay-later options comes as U.S. credit-card balances are also at record levels, signaling that consumers are feeling the strain of high prices and stagnant wages.

Consumer-debt data from the Federal Reserve Bank of New York reveals that the total of Americans' credit-card balances reached $1.233 trillion in the third quarter of 2025, the highest since the New York Fed started tracking this data in 1999.

"As long as there's economic pressures, people will use BNPL," Murray said. "We fear people will end up in financial trouble."

Younger borrowers may also be more exposed to the risks of these types of loans, both because they use them more often and because a larger share of buy-now-pay-later loans originate from borrowers with subprime credit. Millennials are the most likely to have used this option at least once (48%), followed by 40% of Gen Z, 28% of Gen X and 13% of baby boomers, according to Empower data.

Some of that gap may simply reflect that younger generations grew up using internet tools and shopping online, or it may be related to a high percentage of buy-now-pay-later loans originated by borrowers with subprime or deep-subprime credit scores.

Experts emphasize that the rising use of these loans doesn't automatically signal reckless spending - but they say it does reflect how many Americans have turned to financing in order to pay for ordinary purchases these days. "It's a new evolution of a layaway kind of thing," Murray said. "It's not all negative. It's just different."

Read on: A warning for all Americans - this is not a good time to put things on credit

-Weston Blasi

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December 04, 2025 10:41 ET (15:41 GMT)

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