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Buy now, pay later for holiday gifts is ‘horrible’: Harvard fellow

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Americans are increasingly finding alternative ways to satisfy their holiday wish lists as they continue to grapple with high prices and inflation.

In many cases, that means opting for flexible payment plans.

On Black Friday through Cyber Monday, buy now, pay later payments through companies such as Klarna, Zip, Zilch, Affirm and Afterpay jumped 85% compared with the week before, according to the most recent data from Adobe. Buy now, pay later revenue rose 88% for the same period.

The option to pay in installments “means a merry Christmas, but in the long run for many will hurt their credit,” said Marshall Lux, a senior fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School.

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Last year, more than half of shoppers made a purchase with BNPL they couldn’t pay off, according to a survey from Oxygen, an online-only bank.

Lux called this year’s spike in installment buying “horrible, and a real statement on how stressed the economy is, especially for the average American.”

Although inflation, overall, began to ease last month, consumer prices were up by 7.7% in October from a year ago and remain near the highest levels since the early 1980s.

Heading into November, 60% of Americans reported living paycheck to paycheck.

Holiday spending sets records

Despite those financial challenges, consumers spent a record $9.12 billion online shopping during Black Friday and another record $11.3 billion on Cyber Monday, according to the most recent data from Adobe.

Roughly 196.7 million Americans shopped in stores and online over the five-day Thanksgiving weekend, also an all-time high, a separate report by the National Retail Federation found.

“As inflationary pressures persist, consumers have responded by stretching their dollars in any way possible,” said NRF President and CEO Matthew Shay. “In some cases, they are taking on additional credit,” he added.

Americans use buy now, pay later as a ‘lifeline’



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