MINNEAPOLIS — The holiday shopping season is in full swing, and when it's all said and done, it's expected to exceed pre-pandemic totals.
The National Retail Federation expects holiday spending to reach $966 billion by the end of December, and Adobe Analytics is projecting a strong increase in shoppers choosing “buy now, pay later” options this year.
Based on survey results Adobe says Americans spent $940 million on Cyber Monday using the “buy now, pay later” feature, that's a 42.5% increase over last year, and a new record.
During entire month of November Adobe is estimating Americans spent $8.3 billion and are planning to pay it back later in the coming weeks.
“The reason why 'buy now, pay later' is popular is it’s accessible to many more people now,” Lutheran Social Service financial counselor Kim Miller said.
Shoppers are often lured in by the great terms, like no startup fees, and no interest if you pay on time, but if shoppers miss a payment, they could end up spending even more than using a credit card.
LendingTree surveyed 2,000 people who use 'buy now, pay later' and 40% said they have missed at least one payment and had to pay a late fee.
"Our brains just think oh, $8 late fee on $50 that may not be that big of a deal when really that can add up just as dangerously over time,” Miller explained.
On top of those fees, Miller says some long term "buy now, pay later" plans charge interest. According to LendingTree, the interest rate can be as high as 30%, which is higher than most credit cards.
Miller says it's important to read the fine print.
"Do they charge fees upfront? Do they charge interest if you can't pay it in full? Do they charge a late fee?”
Miller says it's also easier to overspend while using "buy now, pay later."
It's easy and accessible, and with smaller payments, shoppers may not realize they've gone over budget until it's too late.
"I think it's definitely a reflection of where people are at, especially over the holiday season it comes charged with a lot of emotions. People want to provide for their families. They want to create memorable moments. We just encourage people to keep track of that spending. Keep track of the payments that are going to be coming due.”
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