Survey Finds Gen Z Uses 'Buy Now, Pay Later' For Christmas Shopping — & Take On Record Debt In The Process
Experts are calling it "Klarna Week" as Gen Z takes on Christmas debt in droves.
Drazen Zigic | Shutterstock It's no secret that economic times are tough and that Gen Z struggles far more than a lot of us. That all goes into overdrive as the holidays approach, of course.
According to a new study, that means one thing for Gen Z: Staggering debt, as young people increasingly turn to predatory payment schemes to afford holiday gifts for their loved ones.
The survey found that Gen Z will make record use of 'Buy Now, Pay Later' services this Christmas.
The holiday season, and especially its first few days, is full of catchily sloganed theme days, from Black Friday and Small Business Saturday to Cyber Monday and Giving Tuesday. Now, experts say, we can add a new one, at least where Gen Z is concerned — "Klarna Week.
That's in reference to the buy now, pay later (BNPL) service Klarna and its many imitators (AfterPay, ClearPay, etc.) that split purchases into installment payments with no interest or fees — IF you make all payments in full and on time.
That, of course, is the catch — when you're racking up tons of Christmas shopping, all those installment payments rack up right along with them. A survey by the financial literacy app Frich indicates that a lot of young people will find themselves in a bit of trouble over the next couple of months.
Gen Z's use of 'Buy Now, Pay Later' services is much higher this year than in previous years — and so is Gen Zers' debt.
For its analysis, Frich surveyed its more than 700,000 Gen Z users about their holiday spending habits and got some startling results. The second week of December is historically when BNPL holiday shopping spikes — hence the name "Klarna Week," which this year refers to the week of December 9.
But Frich found that BNPL shopping among Gen Z had already massively spiked weeks before that all-important period — Gen Z's BNPL holiday purchases are already up by 31% over 2023.
Unsurprisingly, so is Gen Z's debt. Frich found that Gen Z's credit card debt has risen by a staggering 49% since 2023 and late fees on payments by 14%.
While BNPL services won't add to that load so long as users choose short-term payment plans and pay all installments on time, that's a big "if." Typically these plans consist of around four payments spaced a couple of weeks apart — but not everyone can afford that, of course.
Longer-term BNPL plans, however, often have interest, just like a credit card — and the rates can be staggering, up to 36%, according to some finance experts. And if you miss any payments? Expect to get hammered with fees.
Gen Z's anxiety about holiday shopping debt is also much higher this year.
This situation says a lot of things about Gen Z's financial realities, none of them good. Accordingly, young people are feeling very nervous about it. Frich's analysis found more than 52% of Gen Zers are feeling more anxious this holiday season than in 2023.
Perhaps most telling of all, Frich found that only 12% of Gen Zers surveyed would actually admit to using BNPL services despite the much higher actual rates of usage found among the generation.
This suggests, of course, that they aren't stumbling into these services unawares after falling for their often predatory marketing schemes. Rather, much like all the generations before them with credit cards, it seems Gen Zers are well aware they're taking a huge gamble but see no other options.
So what's the solution? Well, better pay and a better economy, for starters. But Katrin Kaurov, CEO and Co-founder of Frich, urges young people to be wary of using both credit and BNPL schemes.
"While buying on credit certainly isn’t a new thing," she said, "buy now, pay later services can lull users into a false sense of security and convince them to develop unsustainable financial habits."
She cautions people against making BNPL services a catch-all solution for a lack of shopping budget because they're "not really intended to be used for smaller purchases like holiday gifts" and "there can be a negative impact on your credit history."
None of us is immune to the commercial pressures of the holiday season, but there are myriad ways to celebrate and make memories without spending tons of money on more and more stuff. It's a tough decision, but it simply isn't worth it in the long run if participating puts you in a financial bind. Buyer beware.
John Sundholm is a writer, editor, and video personality with 20 years of experience in media and entertainment. He covers culture, mental health, and human interest topics.