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The holiday spending spree is fueled by ‘Buy Now, Pay Later’ shoppers

By Nathaniel Meyersohn, CNN

New York (CNN) — The Black Friday and Cyber Monday billion-dollar US spending spree was fueled by “Buy Now, Pay Later” shoppers.

On Cyber Monday, Buy Now, Pay Later purchases hit an all-time high, up 43% from a year ago, according to Adobe Analytics. The number of items per order also rose 11% annually as shoppers used Buy Now, Pay Later for larger purchases.

While Cyber Monday and Black Friday hit online sales records, shoppers’ reliance on delayed payments could mean a financial squeeze when the bills come due. Consumers risk stacking on debt they can’t pay off with Buy Now, Pay Later purchases, financial researchers say.

BNPL installment plans have become popular with both shoppers and stores. These services split a purchase into four or more installment payments to be paid over a period of few weeks or months. BNPL accounts are typically offered with zero or minimal interest – unless payments are missed – and often come without a hard credit check.

While Buy Now, Pay Later was initially designed to help shoppers pay for big-ticket purchases, consumers are increasingly using these services to buy groceries and everyday necessities, research shows.

Many Buy Now, Pay Later users are financially fragile, according to New York Federal Reserve research published earlier this year.

BNPL installment payment offerings appear to be disproportionately used by people facing financial difficulties, according to the researchers.

“Despite being fairly broad-based, with significant take-up among higher educated and higher income respondents, overall we find that those with lower credit scores and greater unmet credit needs make up a disproportionate share of all BNPL users,” the researchers said.

During the third quarter, the rate of households becoming delinquent or entering serious delinquency (90 days or more behind) on their credit cards was the highest since the end of 2011, according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit released this month.

CNN’s Alicia Wallace contributed to this article.

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