Buy now, panic later is the new holiday ritual – stopping it won’t be easy

The holiday season brings celebration and gift-giving, but it also ushers in something less festive: financial stress. In the UK, retailers now shape much of the spending calendar, with Black Friday one of the busiest shopping events of the year.

This year on Black Friday^[1] weekend, Nationwide building society alone saw more than 31.2 million transactions^[2], a 5.8% increase on last year. What’s more, households that usually spend around £2,460 a month^[3] (a typical amount in the UK) shell out an additional £713 (29% more) in the month of December.

This spending culture can lead to people^[4] worrying about their budget for December and January, and often pushes them towards borrowing just to take care of their household and family.

Some estimates^[5] suggest that three quarters of UK families rely on credit, including credit cards, overdrafts and buy now, pay later (BNPL) services, to manage Christmas costs. These purchases may feel harmless at the time, but they quickly add up^[6].

The UK already has high levels of consumer borrowing. A report by the Financial Conduct Authority (FCA) found that 65% of UK adults^[7] (35.3 million people) held a credit card.

BNPL has grown especially quickly, probably because it feels effortless to use. In fact, research shows^[8] that BNPL use rose from 17% in 2022 to 27% of adults in 2023, with further increases in 2024.

For the moment, many BNPL products in the UK fall outside the Consumer Credit Act 1974 and therefore remain unregulated. But this is due to change – from July 15 2026 third-party BNPL products^[9] will be fully regulated by the FCA.

In terms of the cost to consumers of BNPL, a study from Stanford University^[10] involving 570,000 people found that BNPL users paid more overall due to higher overdraft fees, interest charges and late payment fines. These costs often become visible only after the holidays when many households realise that the supposedly cheap option was not cheap at all.

Read more: Mobile payments used to be less 'painful' than using cash. That might be changing^[11]

A recent report^[12] on financial capability in the UK suggests that low levels of financial literacy play into these economic difficulties around times of increased spending. Strikingly, these gaps are not limited to a single demographic – they appear across age groups and income levels.

Financial literacy is often misunderstood. Many people assume it is simply mathematics, yet it is far more complex. True financial literacy^[13] is about behaviour and confident decision-making rather than understanding complex products.

In a social and digital environment shaped by targeted advertising, limited-time offers and frictionless credit, even financially knowledgeable people can overspend. The problem is rarely numerical skill. It is the challenge of managing behaviour and emotion at the point of purchase.

Behavioural economist Richard Thaler’s concept of mental accounting^[14] helps to explain why BNPL and credit cards encourage overspending. Thaler’s theory shows that people treat money differently depending on how they categorise it. Creating a category such as holiday spending makes it easier to justify purchases that would otherwise feel unnecessary.

Another concept, payment decoupling^[15], also helps to explain the appeal of BNPL. When buying is separated from paying, consumers feel less of the “pain” of payment. Humans naturally prefer immediate rewards over long-term consequences. BNPL strengthens this tendency by delaying the moment when the financial cost becomes real.

Understanding these psychological processes can help consumers make more confident decisions.