Each Christmas and Black Friday, millions of UK consumers rely on credit cards and Buy Now, Pay Later services to manage holiday spending, which can average around £800 per person during the festive period. While these financing options can seem like an easy solution, many shoppers face a ‘debt hangover’ come January. Recent data reveals that BNPL usage is climbing sharply, with around 50% of UK adults—equating to 26.4 million people—having used BNPL in 2024, up from 36% at the start of 2023.
With this trend in mind, Pepper Money highlights the risks associated with BNPL and offers practical advice on managing holiday spending effectively to avoid falling into debt.
The Risks of Increasing Buy Now, Pay Later and Credit Card Debt
Over the past month, Google searches for “buy now, pay later” spiked to 75,000 highlighting the growing interest in flexible financing options for holiday shopping. According to Pepper Money’s Specialist Lending Study, over half (57%) of all respondents said they’re continuing to see much less disposable income this year. Rather than foregoing gift buying many consumers are turning to “buy now, pay later” services and credit cards to fund these additional expenses. While these options can provide an easy solution short-term,they can come with risks that could impact financial well-being in the New Year.
BNPL services make high-ticket purchases more accessible by spreading payments over weeks or months, making them particularly attractive during high-spend periods like Black Friday. Nearly half of shoppers(44%) plan to use BNPL for their purchases this year. However, while this approach offers immediate flexibility, it often results in multiple active debts, which can be a little challenging to manage. In fact, 9% of BNPL users admitted that using these services has pushed them into debt due to over-borrowing. Recent insights from Pepper Money’s Specialist Lending Study reveal that a £100 increase in monthly bills is significant for 73% of consumers, underscoring how even a modest rise in expenses can impact household finances. During the festive season, shoppers may have instalment payments with varying due dates, increasing the risk of missed payments and additional fees.
Credit cards also provide payment options but at high interest rates, which can quickly rise if balances aren’tcleared, further straining finances. But this combination of BNPL and credit card debt can turn festive spending into a financial burden, a trend underscored by recent data from Pepper Money showing that 41% of UK households have seen their debt levels rise over the past year.
According to a recent survey by the Money and Pensions Service, 1 in 4 UK adults (26%) plan to borrow or use credit to fund their Christmas expenses this year. While these financial tools might seem manageable initially, the risk of accumulating debts can be high.
Spending Based on the Region
According to a 2024 Statista survey, the average amount spent during the festive season per person in the UK is expected to range from £700 in the North East to £973 in London.
Here’s a breakdown of average Christmas spending per person by UK region, ranked from highest to lowest:
| Region | Average Spending (£) |
|---|---|
| London | 973 |
| South East | 912 |
| East of England | 889 |
| South West | 850 |
| West Midlands | 820 |
| East Midlands | 800 |
| Yorkshire & Humber | 780 |
| North West | 750 |
| North East | 700 |
Understanding these regional spending patterns can help consumers plan their holiday budgets more effectively and avoid unnecessary debt.
How to Avoid the Pitfalls of Buy Now, Pay Later Debt
“Buy now, pay later” services have seen a rapid increase in use, especially around the Christmas period, but they come with risks if not managed carefully. The Money Charity reports that the average unsecured debt per UK adult, which includes BNPL, has risen to £4,279 as of mid-2024, reflecting the growing financial strain on consumers.
Here are some practical tips to help keep BNPL usage in check this season:
- Set a Spending Limit: BNPL can make it easy to overspend, so decide on a clear budget for Christmas shopping. According to Citizens Advice, 1 in 12 people using BNPL services end up with unmanageable debt, primarily because they lose track of spending across multiple platforms.
- Track All Payment Due Dates: Each BNPL provider has different payment schedules. Write down due dates, set reminders, or use a budgeting app to ensure you don’t miss any payments and avoid potential late fees. Research from Which? shows that 40% of BNPL users have missed at least one payment, leading to additional fees that make purchases costlier than expected.
- Use BNPL Selectively: It can be tempting to spread the cost of every holiday item, but the debt can quickly add up. The Financial Conduct Authority warns that BNPL products, while convenient, can encourage excessive spending. Consider reserving BNPL for essential or high-priority items and paying cash for smaller purchases.
- Pay Down Balances Early When Possible: If you have extra cash, consider putting it towards your BNPL balance to avoid lingering debt. Finder found that 10% of BNPL users felt trapped in a cycle of ongoing payments, which could have been avoided by paying down balances earlier.
- Understand Fees and Penalties: Many BNPL services promote interest-free periods, but late fees or penalties can apply if payments are missed. StepChange Debt Charity reports that nearly 1in 5 users have encountered unexpected fees with BNPL, adding to their financial strain. Knowing the fine print can help you avoid additional costs.
- Limit Non-Essential Buys: Research from Money Advice Service shows that 43% of people using BNPL for non-essential items, like clothes and gadgets, tend to accumulate more debt than planned. Think carefully about each purchase—if you wouldn’t buy it outright, consider skipping it.
- Consider Saving Instead: Waiting and saving up for a big purchase can help you avoid debt altogether.
Using BNPL responsibly this holiday season can help you avoid starting the new year with financial strain. By planning ahead and being cautious with BNPL, you can enjoy the benefits without the drawbacks of mounting debt.
Ryan McGrath, Director of Secured Loans at Pepper Money comments,
“With the festive season well and truly on its way, it’s tempting to rely on Buy Now, Pay Later services and credit cards to manage the expense of gifts and celebrations. However, it’s important to remember that while these options offer flexibility, they can also lead to a financial burden if not used cautiously. Many consumersdon’t realise that BNPL platforms encourage spending across multiple purchases, often resulting in a range of instalment payments with different due dates. The average credit card interest rate is now at 24.57%, meaning even a small holiday debt can balloon if carried into the New Year. This can create a challenging debt cycle, with missed payments often leading to additional fees and higher costs. By setting clear budgets, tracking due dates, and being mindful of interest rates, consumers can avoid starting the New Year with unmanageable debts that could impact their financial goals long-term.”
