Every holiday season brings with it close scrutiny of Americans’ spending, but this year, the gaze cast at shoppers is even more intense than usual. Largely, that’s because no one really understands what Americans are up to. Most measures of consumer confidence suggest the mood has worsened significantly since the 2024 election, with people across the political spectrum concerned about higher prices and a stagnant job market. Consumer behavior has never perfectly mirrored what people say about their own state of mind, but normally you’d expect such widespread fear to be reflected in their holiday shopping decisions.
Not this year. So far, the topline numbers suggest spending is up significantly from 2024 and the volume of people out there shopping is also at an all-time high. According to data from the National Retail Federation, almost 203 million Americans shopped during the five days from Thanksgiving to Cyber Monday, blowing past the trade group’s predictions by almost 9% and exceeding the previous high set in 2023. With those numbers, it can’t be just rich people who are shopping.
For behavior and belief to diverge this far has left experts befuddled. If so many Americans worry they may be laid off or their 401(k) might get vaporized by artificial intelligence companies lobbing the same $100 billion back and forth like a hot potato, why are they still splashing out on holiday decorations and gifts? There probably isn’t a single completely satisfying answer, but if you want to understand the state of the American consumer, the best place to look might be at the performance of “buy now, pay later” lending services, whose customers are a growing cohort of Americans—more than 91 million of them, according to a recent estimate from the financial services firm Empower.
BNPL services are a relatively recent fintech spin on an old idea: More people will buy more stuff if they don’t have to pay for it all at once. The largest players—Klarna, Affirm and Afterpay—arrived in the US in the 2010s and cultivated a customer base by offering short-term payment plans on individual purchases from a host of popular e-commerce sites. Their quick, algorithmically mediated lending decisions didn’t require a traditional credit check, an enticing prospect for people with bad or limited credit history; and their shortest-term loans (“pay in four” programs, which split a purchase into four payments, usually due every two weeks) were generally interest-free. Young consumers with a modest income and limited credit history took a particular liking to BNPL, and they remain its most dedicated constituency. As uptake grew and more retailers began offering these services as a payment option, traditional consumer finance companies and older digital-payment providers including Chase, Citi and PayPal’s Venmo spun up their own versions of on-demand short-term lending, allowing buyers even more ways to chop up purchases into a handful of payments.
BNPL has long been billed as a way to make a large or sudden purchase more affordable without signing up for long-term debt, but now you can find a way to use it for almost anything. Several surveys this year have ranked groceries among the top five purchase categories for BNPL loans, and in March, DoorDash Inc. announced a partnership with Klarna Group Plc to allow people to use its pay-in-four service on takeout orders. Even if you don’t opt into one of these programs on the front end, many credit card issuers will let cardholders opt in afterward to split up purchases of at least $100 or so into a series of payments separate from their regular bill if they pay a small fee instead of the interest the purchase would normally incur.
You’d be forgiven for assuming that BNPL is a homegrown US phenomenon—what’s more American, after all, than new methods of facilitating consumer debt?—but its global growth was kicked off with Klarna’s founding in Sweden in 2005. In Europe, where most people default to debit for everyday purchases and credit cards are not nearly as widely used as they are in the US, a lender such as Klarna had an obvious opening to make big purchases feel more affordable. Europeans still use BNPL for a larger share of their online purchases than consumers anywhere else in the world—about 8% in 2024, according to Worldpay, a payments-processing firm. (It’s about 6% in the US, according to Morgan Stanley.) In Germany, BNPL usage even surpasses that of credit cards, accounting for about 20% of online transactions last year. But the preponderance of credit cards has done little to stymie the growth of the same services stateside, especially after the disruptions of 2020 started pushing more and more of Americans’ purchases online.
It’s hard to imagine how BNPL could be better-suited for this moment in the US, when so many people report being stretched thin but also have made evident their desire to continue spending, even on discretionary items. Lenders have pursued the opportunity with alacrity, teaming up with retailers such as Sephora and Uniqlo to offer discounts when shoppers select their services at checkout. The pitch has worked: An analysis by Morning Consult found that 1 in 4 American shoppers paid for a purchase in November with BNPL, the highest rate on record for the country’s shoppers and a 6-percentage-point increase from the prior year period. The firm said growth was fueled largely by uptake by older shoppers, who’ve been slower to embrace BNPL than their younger counterparts.
For some lenders, the jump in usage was notably higher: Market leader Klarna, fresh off an initial public offering in September, boasted that its November sales volume in the US had spiked 45% from 2024, with Black Friday purchases of things like shoes and beauty products leading the way. On Cyber Monday, BNPL payments accounted for more than $1 billion of e-commerce transactions in the US, according to data from Adobe Analytics—about 7% of Cyber Monday online spending and the highest dollar amount ever recorded for BNPL purchases in a single day.
Because BNPL doesn’t require a provider to register as a bank and adhere to banking regulations, and most short-term lending of this type isn’t reported to credit bureaus, understanding the sector’s full role in consumer spending is more difficult than it might otherwise be. A January study by the Consumer Financial Protection Bureau found that most regular users of BNPL services had multiple active loans at once; they also had on average almost $900 more in credit card debt than similar borrowers who used only credit cards. Overall, BNPL customers tend to have lower credit scores and much higher student loan balances than those who don’t use BNPL.
All of that jibes with what you’d expect for a lender serving disproportionately young and relatively low-income spenders, but other attributes of the business don’t fit quite so neatly. A recent survey from LendingTree found that 41% of BNPL users reported being late on at least one loan payment in the past year, up from 34% in 2024. But, unexpectedly, households making more than $100,000 a year were even more likely to have missed a payment than those with incomes of less than $30,000. And though missed payments are common with these loans, defaults are relatively rare: about 2%, versus about 10% with other types of unsecured consumer debt such as credit cards. (The CFPB speculates that this could be because many of the services require borrowers to set up automatic repayment drafts from their checking account or debit card; even if a user misses a payment because of a low balance, a BNPL service will keep attempting to take what it’s owed.)
BNPL users are far from a perfect representation of the American consumer writ large, but in their spending habits you can see a distillation of many of the population-level behaviors that have so perplexed experts this year. Maybe those behaviors aren’t actually that confusing. Maybe Americans are exactly what they tell us they are, both through sentiment surveys and observable behavior: concerned about their future, though not in a way that makes them want to save for rough times ahead. (After all, Elon Musk says there’s no need to save, because there won’t be poverty in the future.) Or maybe they’re worried in a way that makes accruing a little debt seem like it couldn’t possibly matter all that much—and in that case, might as well get while the getting’s good. Call it the YOLO economy.