Nearly 30% of consumers haven't paid off credit cards from last holiday season: report

Dive Brief:

As buy now, pay later platforms boom in the U.S., only around 18% of consumers said they're paying for their holiday gifts using installment payment services, according to a new NerdWallet survey. Of the shoppers using buy now, pay later options, 36% millennials are using the service, followed by 22% of Gen Z shoppers, 18% of Gen X and 3% of baby boomers, the survey found.
Twenty-nine percent of respondents who put their holiday gifts on a credit card in 2020 said they haven't paid off those purchases from last year. Seventy-five percent said they plan to pay for this year's gifts with their credit cards. Consumers anticipate charging an average of $620 to a credit card this year.
The survey found that 68% of consumers are worried that supply chain issues could cause big-ticket items they want to be out of stock, up from 58% of shoppers concerned about out of stocks last year.

Dive Insight:

As shoppers consider their holiday spending, leftover credit card debt from last year's holiday shopping season may indicate how the pandemic has impacted people's finances.

Research suggests that some consumers don't see their financial situations improving soon. A recent report from Alvarez & Marsal's Consumer Retail Group indicated that over half of consumers (52%) expect their circumstances and their families' outlook to remain the same or worsen over the next six months.

Yet, NerdWallet's survey does suggest that consumers are still shopping. This holiday season will see consumers spending an estimated $163 billion, or an average of $762 per shopper. This is slightly down from last year's forecast where planned gift spending was $167 billion, or $831 on average per shopper, per the report.

"Even as COVID-19 continues to impact the way we celebrate the holiday season for the second year in a row, Americans are holding strong to some traditions, including spending big on gifts and putting a lot of that spending on credit cards," Kimberly Palmer, personal finance expert at NerdWallet, said in the report. "Americans are also worried about supply chain delays, but that's not taking away from the momentum behind their desire to shop."

Additionally, as consumers wade into the installment payment market, lawmakers are eyeing possible regulations for the alternative payment services. This week, the head of the Financial Technology Association defended BNPL financing deals at a congressional hearing against claims by critics that the payment option encourages consumers to spend more than they can afford, thereby damaging their credit scores.

A report from Juniper Research estimates that the buy now, pay later market will reach $995 billion by 2026.