November 29 (UPI) – More Americans are turning to “buy now, pay later” options for their holiday shopping this year – choosing to choose debt over paying for freebies, according to a new study.
Companies such as Affirm, Afterpay, Klarna, Quadpay, and Sezzle allow buyers to pay for their purchases in a series of installments, which are usually interest-free, unlike loans or credit card debt.
Among these services, also known as BNPL companies, Klarna saw the largest increase in overall spending leading up to the holiday season, according to the study published Nov. 22 by consumer data research firm Cardify.
Klarna, which was founded in Sweden in 2005, has over 90 million active consumers using its services with around 2 million purchases made through the company per day, according to its website.
The Cardify study found that BNPL shoppers were willing to spend more than last year during the holidays compared to those who did not use such services.
“While the bells will ring in the near term, it is unclear how BNPL brands and holiday shoppers will handle entering 2022 with a potential hangover,” the study reads.
The survey of 2,000 verified buyers from BNPL found that 45% said they would pay for at least a portion of their holiday gifts through such payment plans.
Of those polled, Cardify noted that 65.7% would choose to pay for some of their freebies with debit cards, while 54.6% would go with credit cards. Only 31.5% of those surveyed said they would prefer to pay for their gifts in cash.
Cardify found that 8.6% of those surveyed would even choose to pay for their vacation in full through BNPL services.
The study found that 10.8% of those surveyed admitted to defaulting on previous BNPL payments. A study of the financial site Credit Karma found in September that 34% of people who used these services in the past were behind on one or more payments.
BNPL providers such as Klarna have been criticized for potentially encouraging consumers to spend more than they can afford or even earn comparisons with payday loan companies.
A study directed by Debt Hammer found that up to 58% of consumers expect to take out a payday loan before the holidays – while 66% of Americans would use BNPL’s services.
About 48% of respondents to the Cardify survey said they would be forced to spend less if BNPL was not an option, most likely for smaller items.
Credit Karma’s investigation found that BNPL’s services were most often used for high-priced items such as household items and furniture, as well as electronics.
This survey found that 49% of Gen Z consumers were the most likely to use BNPL services for products up to $ 100, while 56% of baby boomers were the most likely to use these services for purchases over $ 500. Millennials and Gen X consumers were the most likely to use such services for goods between $ 100 and $ 500.
“Despite the potential drawbacks, most respondents who have used a product to buy now, pay later have used it more than once, indicating that consumers are happy with the shopping experience.” , we read in the study of Credit Karma.