Holiday debt hangover poised to be 'particularly nasty' this year, analyst says
National Retail Federation CEO Matt Shay dissects consumer spending and the retail industry as shoppers hit stores across the country for Black Friday.
While retail sales are strong, typically an indication of a healthy consumer, an industry economist is deeply concerned about how consumers will pay it all off when the bill comes.
Bankrate senior industry analyst Ted Rossman's concerns were heightened, in particular, after noticing an uptick in usage for buy now, pay later (BNPL) services as consumers battle growing debt obligations.
These payment services were up 40% year over year on Black Friday and Cyber Monday, according to data from Adobe.
This uptick suggests that «a lot of people are close to the edge,» and it's one reason why Rossman believes the «holiday debt hangover could be particularly nasty this year.»
CYBER MONDAY SALES REACH $12.4B DRIVEN BY 'BUY NOW, PAY LATER'
«I think the substantial surge in BNPL usage (on top of already explosive growth in recent years) shows how many people are looking for quick, affordable financing,» he said.
These services – like Klarna or Afterpay – are advertised as interest-free loans that can be paid in weekly or monthly installments. And while it can help ease cash-flow issues, financial experts say there are hidden risks when shoppers rely on the services too much.
An advertisement for the Klarna Buy Now Pay Later app is visible in the Broadway Plaza shopping center in Walnut Creek, California, on November 24, 2021. (Smith Collection/Gado/Getty Images / Getty Images)
«While one could use these plans to their advantage, I do worry they’re too easy sometimes, and there isn’t enough visibility on credit reports, and sometimes people can trick themselves into spending
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