News & Trending Debt & Bankruptcy News

Holiday Buy Now Pay Later Surged, But Now Consumers Can't Pay

Those who took advantage of the BNPL craze during the holidays are now feeling the pinch. Maybe you're among them?

Young woman stressed about debt
Updated May 15, 2025
Fact checked

The allure of holiday sales and enticing deals drove a surge in online spending during the festive season, propelled by the booming trend of "buy now, pay later" services. 

This financial phenomenon, allowing consumers to split payments over several weeks, played a significant role in a 14% year-over-year increase in online spending, reaching a staggering $222 billion from November 1 to the end of December. 

However, as the holiday cheer has now subsided, a darker reality has set in for consumers facing the aftermath of their splurges using this payment plan, which is also known as "phantom debt."

Get instant access to hundreds of discounts

Over 50? Join AARP today— because if you’re not a member you could be missing out on huge perks like discounts on travel, dining, and even prescriptions.

Get 25% off membership — just $15 for your first year with auto-renewal — and a free gift if you join today.

Become an AARP member now

What happens if you can't make your phantom debt payments?

The post-holiday season paints a bleak picture for many consumers who eagerly embraced buy now, pay later. The installment model, while enticing during a shopping spree, transforms into a financial burden as payments come due. 

The uncertainty surrounding buy now, pay later services has given rise to a phantom debt phenomenon, leaving consumers unsure about the consequences of non-payment. 

Delinquency rates and the overall impact on the economy remain shrouded in mystery, as service providers like Klarna, PayPal, and Affirm keep such data undisclosed, meaning your credit score doesn't get impacted right away — but it will eventually.

Many people think this debt isn't as damaging as credit cards because of how quickly credit card issuers notify credit bureaus, the fees you incur, and the overwhelming interest you end up paying with cards. 

While phantom debt doesn't come with those issues, it's still going to damage your credit if you fail to make payments, and eventually a collection agency will likely come after you for the debt. 

Why buy now, pay later was popular during the holidays

As the festive season unfolded, consumers sought innovative solutions to fund their holiday shopping without succumbing to traditional credit card debt. The buy now, pay later services provided by platforms such as Klarna and PayPal became a lifeline for many, offering the flexibility of spreading payments over interest-free installments.

The ease of access and the appeal of deferred payments contributed significantly to a record-breaking online spending spree, with buy now, pay later usage soaring by an unprecedented 14%.

Cyber Monday alone witnessed a staggering 43% surge in the adoption of these services, revealing their influential role in shaping consumer spending behavior.

All spending-related debt is pinching your budget

However, beneath the veneer of holiday cheer lies some concerning repercussions of phantom debt. Credit card debt has reached an all-time high, coupled with a doubling of delinquency rates over the past two years. This helped push consumers toward pay-later solutions. But this is also now making it hard for people to make those payments. 

Persistent inflation and record-high interest rates have shaped the financial decisions of many consumers, pushing them toward alternative financing methods like buy now, and pay later. This surge in usage has raised eyebrows, prompting questions about the sustainability and consequences of such financial strategies.

When consumers are allowed to take out excess debt for spending they can't otherwise afford, it can create issues with their budgets. This is happening right now, possibly at a higher rate than ever before. It's important to get this spending under control and crush your debt before it wrecks your other finances. 

How to get out of phantom debt

Navigating the complexities of buy now, pay later debts requires strategic financial planning and a clear understanding of one's obligations. Financial coaches, like Alaina Fingal, have witnessed an influx of individuals seeking assistance in managing post-holiday financial stress, reports CNBC. 

However, financial experts emphasize the importance of devising a structured plan to manage payments and prevent a cascading cycle of debt. Awareness, budgeting, and financial literacy are essential tools for escaping the clutches of phantom debt. 

You can also consider contacting the lender to see if they are willing to set up special payment plans to get you back on track with payments. Getting in communication with anyone you owe money to is the preferred action over just missing or skipping a payment. 

Bottom line

As the dust settles on the holiday shopping frenzy, consumers are left to grapple with the consequences of their buy now, pay later decisions. The buy now, pay later craze may have fueled a festive shopping bonanza, but its aftermath poses challenges that require careful navigation. 

In a world where financial choices can carry long-term consequences, an understanding and commitment to more prudent financial planning is paramount. Ultimately, you need to live on a budget, with your debt payments in mind. This might mean making some sacrifices or finding a way to earn some extra cash so you can pay off your debt and start living below your means. 


Up To 5% Cash Back

4.7
info

Discover it® Cash Back

Current Offer

Discover will match all the cash back you’ve earned at the end of your first year.

Annual Fee

$0

Rewards Rate

Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases.

Benefits and Drawbacks
Card Details

Financebuzz logo

Thanks for subscribing!

Please check your email to confirm your subscription.