Dive Brief:

• Signaling consumers’ constrained budgets, a LendingTree holiday debt survey found that more than a third (35%) of Americans took on debt to pay for their holiday purchases in 2022, a slight decrease from 36% in 2021. However, consumers accumulated $1,549 in debt on average, up 24% from $1,249 in 2021.
• More than a third (37%) of survey respondents said they expect to take five months or more to pay off their debt, an increase from 28% in 2021. Nearly two-thirds (63%) of respondents who took on holiday said they didn’t expect to do so, compared to 54% in 2021.
• Less than a quarter (24%) of respondents had used buy now, pay later services to finance their 2022 holiday shopping, a decrease from 33% the previous year. While BNPL platforms came second to credit cards (59%), store credit cards (24%) took the third spot for the top sources of holiday spending debt, per the report.

Dive Insight:

LendingTree’s research echoes other reports indicating that consumers lacked financial flexibility this past holiday season. While more people are take five or more months to pay off their holiday debt, 22% said they will take three months to do so, and 18% are only planning to make the minimum payments on their debt.

An Oracle Retail consumer study found that 71% of respondents were open to a store payment plan or a financing option to pay for their holiday purchases, and a quarter of respondents had never used financing options. Plus, a PYMNTS report found that nearly half of consumers paid for their Black Friday purchases using credit cards.

Meanwhile, another report from Adobe Analytics found that BNPL transactions jumped 85% during Cyber Week compared to the previous week. Installment payment platforms generated 88% more revenue during that time. Though retailers garnered more sales from the buy now, pay later providers, the use of such services could be a sign of long-term consumer instability, Rod Sides, global leader at Deloitte Insights told Retail Dive in November.

“For millions of Americans, it’s not possible to pay off their credit cards in full regularly,” LendingTree Chief Credit Analyst Matt Schulz said in a statement. “Life is expensive in 2022, and it isn’t going to get any less so in 2023. That means that people’s financial wiggle room is almost zero, so any unexpected expense can put them in debt whether they like it or not.”