As the festive season approaches, financial strains linked to Christmas spending are becoming increasingly evident amid widespread use of credit options, particularly Buy Now, Pay Later (BNPL) schemes. A recent survey by the banking app thinkmoney reveals that approximately one in seven shoppers (14%) plan to use BNPL to fund their Christmas this year, while a quarter (25%) intend to rely on credit cards. This dependence on credit has raised concerns about the durability of financial burdens well beyond the holiday period, with only around 22% of shoppers expecting to clear their Christmas bills by year-end.

The thinkmoney survey, conducted by Censuswide in September with 2,000 participants, also highlights regional disparities in expected festive spending. Shoppers in Scotland anticipate the highest average Christmas bills, estimating about £1,019, nearly double the £566 projected by those in the East Midlands. Just over a quarter (26%) of surveyed individuals have planned their Christmas budgets by September or earlier, while many expect to curb other expenses, including nights out and energy costs, to manage holiday finances.

BNPL's appeal is resonating strongly across demographics, especially among younger adults aged 25 to 34, with 73% finding BNPL an attractive option to spread holiday costs. Nationwide, nearly half of respondents (47%) find BNPL a useful tool for managing expenses. This aligns with broader industry data showing a substantial increase in BNPL usage: UK Finance reported that one in four UK adults (25%) used BNPL services last year, a rise from 14% the previous year. Retail spending on BNPL surged by nearly 13% in 2023, amounting to £16.8 billion, according to Retail Gazette, underscoring a growing consumer preference for flexible payment solutions during the festive period.

However, this growth has prompted regulatory scrutiny. The Financial Conduct Authority (FCA) has expressed concern over some BNPL users potentially overstretching themselves financially and incurring charges on loans they cannot repay timely. The FCA launched a consultation this year proposing new rules to enhance consumer transparency about BNPL borrowing, aiming to bring BNPL under its regulatory purview starting in July 2026. These forthcoming protections would enable borrowers to benefit from safeguards similar to those applying to other credit products, including access to the Financial Ombudsman Service for complaints.

The FCA also secured recent contractual changes to address unfair terms in unregulated BNPL agreements, following data showing a sharp increase in BNPL users—27% of UK adults had used BNPL at least once in the six months before January 2023, up from 17% in mid-2022. With the consultation now closed and feedback under review, final regulatory rules are expected to be published in early 2026. Firms wishing to continue offering BNPL products will need relevant consumer credit permissions, with a temporary permissions regime opening in May 2026 ahead of full regulation.

Complementary research by Citizens Advice highlights even greater reliance on BNPL during Christmas, with 28% of UK adults planning to use such services for festive purchases. Among parents with primary school-age children, this figure escalates to 56%, raising alarms about a potential surge in household debt and financial difficulties post-holiday. Equifax UK's BNPL Barometer further confirms this trend, reporting that nearly a third (32%) of consumers intend to use BNPL for Christmas and associated sales periods, with 30% of BNPL users indicating they would struggle to afford Christmas without it.

Financial experts, including Vix Leyton from thinkmoney, caution that while spreading the cost of Christmas can be attractive, it carries the risk of turning festive joy into a prolonged debt burden. She advises consumers to prioritise essentials, plan early, create gift lists and budgets, set spending limits with family and friends, and capitalise on sales wisely to avoid last-minute panic buying. Ultimately, she emphasises that Christmas should focus on celebrating together rather than overspending.

With BNPL poised for increased regulation and the evident reliance on credit for festive spending, consumers, regulators, and financial services alike face the challenge of balancing access to convenient payment options with safeguarding financial wellbeing during what is often an expensive time of year.

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Source: Noah Wire Services