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won't completely replace credit card spending anytime soon. About half of U.S. consumers, some 137 million people, made at least one credit card purchase on every Black Friday since 2020, according to Pymnts Intelligence. But buy now, pay later plans are playing an increasingly larger role in holiday spending.

On Cyber Monday alone, consumers spent nearly a billion dollars using buy now, pay later plans, a 42.5% increase over 2022, according to Adobe Analytics, which tracks consumer retail spending.

This was consistent with what consumers told Experian regarding how they expect to pay for their holiday shopping: Overall, 20% plan to use buy now, pay later plans as at least part of their holiday spending strategy this season.

Buy now, pay later plans are gaining popularity among all segments of the population, including older consumers and those with higher incomes. Adoption rates are highest among younger consumers, however: Nearly half of consumers ages 25 to 34 say they plan to use buy now, pay later for at least some of their holiday purchases in 2023. Adoption rates decline steadily the older the shopper, with only 10% of those age 65 or older expecting to use buy now, pay later. 

Although buy now, pay later plans may appear to be a source of financing preferred among some lower-income consumers, Experian data indicates that income isn't a factor in determining who uses the plans. Somewhat surprisingly, those with higher incomes are about as likely as those with lower incomes to use buy now, pay later plans.

One major incentive for consumers to use buy now, pay later may be . Consumers face interest rates averaging close to 23% APR on credit card balances, and may be reluctant to place additional holiday spending on cards—especially considering the in mid-2023, according to Experian data. Significant percentages of population segments—even millionaires—carry interest-accruing credit card debt. 

Among those who said they plan to use buy now, pay later to pay for at least some of their holiday spending, controlling their spending was identified as the most important reason—though not by much. While 34% of consumers cited managing spending as a reason to use buy now, pay later, 31% said that convenience—a quality usually attributable to —was also a factor.

Nearly a quarter of consumers cited avoiding interest payments as a reason to use buy now, pay later. But perhaps the more interesting finding was how few consumers—only 11%—cited the buy now, pay later option as a result of having no other funding alternatives for financing their spending.

The bottom line

As buy now, pay later plans become ubiquitous as a payment option for both online and in-person shopping, some expect the plans to become even more interwoven into the commercial life of consumers, not only in December but also in the other 11 months of the year.

While BNPL accounts are typically not reported to the three major consumer credit bureaus (Experian, TransUnion and Equifax), that growing usage still has the potential to affect a consumer's credit. Missing multiple BNPL payments could cause the account to be , which could appear on credit reports and affect credit scores. And over-reliance on buy now, pay later could result in high monthly payment obligations that may cause users to miss their existing bill payments, such as auto loan and credit card payments.

With the popularity of buy now, pay later among consumers—especially younger ones—likely to continue, the payment method could have an effect on the way we spend and save around the holidays for the foreseeable future.

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