Buy Now, Pay Later Could Make Christmas Easier—But What Happens to Your January Budget?
With inflation driving more "buy now, pay later" holiday shopping, experts warn that poor discipline risks ruining January budgets
Credit: Pavel Danilyuk/pexels.com | Courtesy
The holiday season always comes with a lot of joy, and a lot of commitments. And way too many of those require families to spend money, making this one of the most stressful times of the year. Holiday magic cannot, after all, pay the bills.
But how are families dealing, and how are they budgeting for Christmas? More than half of American consumers are using the “buy now, pay later” approach, according to the seventh annual Consumer Holiday Spending Study conducted by The Strawhecker Group and the Electronic Transactions Association. The study also found that people are using this approach 20% more than last year and that 44 percent of consumers feel more stressed this holiday season than last year.
“Buy now, pay later” is a short-term financing option that lets consumers make purchases and pay part of the cost upfront, with the rest delayed.
A separate Synchrony (SYF) survey showed consumer interest in financing deals that split purchases into smaller payments was 42 percent, up 12 points year over year. Shoppers are also going out of their way to find the best price and are being more selective with spending.
The survey reported that in general, consumers expected to spend approximately $1,034 on holiday gifts.
Donald Klepper-Smith, an economist with DataCore Partners, explained that these “are moves of economic necessity because people cannot keep up financially because of inflation.” But experts say the approach also requires discipline and organization; otherwise, many families could start the new year with debts they cannot pay. The debts still have to be paid, after all, and they can wreck a family’s January budget if not handled correctly.
“People are trying to do what they can to make ends meet,” Klepper-Smith said. “When balances get beyond a certain point with a credit card, the consumer is not going to be able to pay for them. With buy now, pay later, people are betting on themselves and their ability to pay off what they owe in the short term.”
