skip to main content

US 'buy now, pay later' splurges raise holiday debt hangover risk


Roxanne Ross of Florida is one of a growing number of Americans dodging higher interest rates on credit cards by instead turning to “buy now, pay later” services as they shop for holiday merchandise.

Ross has her eyes on the latest Apple (AAPL.O) AirPods for $249. As of Monday, she was considering using Klarna, a buy now, pay later service, to spread the cost across four installments that stretch into next year.

With U.S. credit card balances at record levels and defaults rising, more shoppers than ever are tapping buy now, pay later services on key shopping days to stretch their budgets.

While they can be a tool for shoppers like Ross, who plans to continue taking out weeks-long, interest-free loans she has used for everything from plane tickets to hair extensions – consumer advocates are raising red flags about cash-strapped shoppers who are adding months-long loans with rates that can top out at 36% – the maximum lenders can charge in many states.

Demand for debt counseling services is up significantly from last year, defying the seasonal slowdown experienced during the holidays, said Bruce McClary, spokesman for the ​​​​​​​National Foundation for Credit Counseling.

The increased use of buy now, pay later loans from providers like Klarna, Affirm (AFRM.O), PayPal (PYPL.O) and Afterpay (SQ.N) “signal an increase of short-term debt on top of the more than $1 trillion in outstanding credit card balances,” McClary said.

Read More – Source