More than half of shoppers are going into debt this holiday season, study finds

• As shoppers spread out their holiday purchases amid ongoing concerns about Covid, more consumers are tapping so-called buy now, pay later services.
• Yet studies show installment payments encourage consumers to spend more than they can afford.
• As many as 56% of shoppers have made a purchase with "buy now, pay later" services they couldn't pay off, according to one recent survey.

Americans are spending a little less this holiday season — but still more than they can afford.

Total spending on Black Friday, both in stores and online, fell slightly from a year ago — the first decline on record — in part because holiday shoppers started their shopping earlier in face of supply chain setbacks and shipping delays.

All in, consumers plan to spend $997.73 on average for themselves and their families this year, according to the National Retail Federation's annual survey, down from the pre-pandemic high of $1,047.83 hit in 2019.

And for the first time, about 45%, of shoppers plan to use "buy now, pay later," or BNPL, services for their holiday shopping to spread out their expenses, according to a recent report by Cardify, which polled more than 2,000 adults.

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"It's become more mainstream," said Derrick Fung, CEO of Cardify. "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 lets shoppers break their purchases into equal installment payments, often interest-free, which can make even the biggest-ticket items seem affordable and the smallest purchases seem almost negligible. It's similar to old-school layaway plans, except consumers get the product up front and pay for it in incremental amounts.

However, installment buying could encourage consumers to spend more than they can afford. Nearly 46% of shoppers said that they would spend less if BNPL wasn't an option, Cardify found.

For consumers, there's always a catch, according to Matt Schulz, chief industry analyst at LendingTree. Miss a payment and there could be late fees, deferred interest or other penalties, depending on the lender.

In fact, 56% of shoppers have made a purchase with BNPL they couldn't pay off, according to a separate survey from Oxygen, an online-only bank.

Roughly 43% said if a big purchase had a BNPL option they would be more likely to buy it, Oxygen found.

Of course, now shoppers can tap a short-term loan to buy just about anything, anywhere.

As installment payments gain momentum along with a surge in online shopping, in general, in the wake of the Covid pandemic, most consumers will see a BNPL option when shopping online at retailers such as Target, Walmart and Amazon.

Many BNPL providers are now introducing browser extensions, as well, which you can download and apply to any online purchase.

Then there are also smartphone apps, which let you use installment payments when buying things in-person, too — just like you would use Apple Pay.

Another recent survey from DebtHammer.org found that while more than 78% of Americans plan to set aside money for their holiday purchases, 66% plan to use BNPL plans.

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