BUY NOW, PAY LATER?

The Hancock Group |
Categories
Christmas Spending
Credit
Debt

by Martain Ferguson, Client Service Associate, The Hancock Group, Inc. 

As the holidays approach, so does a major increase in spending. Americans spend an average of $461 billion
on retail purchases during December, at least $73 billion more than in any other month (Census Bureau, 2024).
 

For the 2024 holiday season, estimates are that “Buy Now Pay Later” (BNPL) spending will account for $18.5 billion,
up 11.4% from last year. Compare this to an expected 8.4% on overall holiday
spending, and we see that more people will be taking on debt this year.
 

Many BNPL programs allow payments in installments, often over four payments. Still, some use credit cards, potentially 
increasing their debt. Considering delinquency rates for credit cards have been at their highest since 2011, it is vital to consider 
how much you want to rely on credit cards for holiday purchases. 

According to Forbes Advisor’s Weekly credit card report, the average credit card interest rate is currently 28.75% (Forbes Advisor, 2024). 
That creates a lot of potential interest to be paid on your purchases if you’re not paying off the card regularly. The most recent U.S. credit card
debt and household data shows that the average American household has about $8,871 in credit card debt (Federal Reserve, 2024).


Entering those numbers into the Minimum Payment Calculator at “Bankrate.com” shows that paying just the
minimum of interest plus 1% of the balance would take 351 Months (over 29 years) to pay off the debt and 
cost you $20,710.05 in interest (Bankrate, 2024).


So what’s the takeaway? As you plan your holiday shopping, consider your budget and ability to meet future payments, understand 
the terms of BNPL services, and explore alternative payment methods that suit your financial situation. Responsible spending 
is key to long-term financial health.
 

1. Census Bureau (2024). https://usafacts.org/articles/how-much-money-do-americans-spendon-holiday-shopping-2023/
2. Forbes Advisor (2024). https://www.forbes.com/advisor/credit-cards/average-credit-card-interest-rate/
3. Federal Reserve (2024). https://www.fool.com/money/research/credit-card-debt-statistics/
4. Bankrate (2024). https://www.bankrate.com/credit-cards/tools/minimum-payment-calculator/
Most numbers from https://www.reuters.com/markets/us/us-holiday-spending-buynow-pay-later-hit-record-due-debt-laden-shoppers-2024-09-25