As the Christmas and New Year shopping spree sweeps across the United States, a peculiar trend is becoming more prevalent in the realm of consumer spending ~ the widespread adoption of ‘buy now, pay later’ (BNPL) services. While this approach to holiday shopping seems like a convenient solution for many, it carries underlying risks that demand a closer look. The concept of BNPL services is simple yet seductive. Shoppers can acquire desired items immediately and defer payments over several months, seemingly providing financial breathing room during the holiday splurge.

This model is gaining popularity, especially among those seeking an alternative to traditional credit cards with their often burdensome interest rates. However, beneath the festive façade lies a nuanced reality. The enticement of interest-free loans and flexible payment plans can mask the potential pitfalls of these financial instruments. The alarming fact that these services can charge interest rates as high as 36 per cent raises a red flag, particularly when juxtaposed against the backdrop of rising defaults on credit cards. For many consumers, these services offer a gateway to instant gratification, allowing them to revel in the joy of owning coveted items without an immediate strain on their wallets. Yet, the allure of spreading payments over time can lead to a slippery slope, especially for those already burdened by existing debts. ‘

The inherent risk lies not only in the interest rates but also in the psychological impact of deferred payments. The ease with which one can accumulate multiple BNPL loans, underscores the potential for over extension. The allure of small monthly payments may lure consumers into a trap, where the convenience of instant purchases overshadows the fine print, resulting in unexpected costs and, potentially, a cycle of debt. Furthermore, the argument that BNPL services provide an alternative to highcost credit cards should be scrutinised. While they claim to cater to a diverse clientele, the data suggests that typical users often carry existing financial vulnerabilities. This group, already under financial stress, risks exacerbating the situation by falling into the trap of accumulating debt through these services. As we approach the end of the year, the holiday debt hangover looms large. Financial analysts are already expressing concerns about the potential repercussions, emphasising that even users who diligently make payments can find themselves over extended.

The surge in demand for debt counselling services is indicative of the struggles faced by individuals navigating the complex landscape of BNPL services. In navigating the festive season’s shopping frenzy, it is crucial for consumers to exercise caution and financial prudence. While BNPL services may offer short-term relief, long-term consequences can be significant. A thoughtful approach to holiday spending, with a keen awareness of the true costs, is paramount in avoiding the pitfalls that lurk beneath the glittering surface of festive discounts and deferred payments. The lessons from America are relevant to India as well, as consumers are lured by interestfree EMI offerings.