The BNPL Reckoning Approaches: Why Buy Now Pay Later Default Rates Could Surge in Early 2026

The buy now pay later revolution that transformed online shopping may be approaching a moment of truth. Research from marketing intelligence platform Sooth suggests that BNPL default rates could surge as much as 50 percent in the first quarter of 2026 as the installment payments from record holiday shopping volumes come due. Combined with existing data showing that over 40 percent of BNPL users have already missed at least one payment, the warning signs for the sector—and for consumers relying on these services—are increasingly stark.

For the millions of Americans who used BNPL services to finance holiday purchases, the coming weeks will test whether the "pay later" promise becomes a financial burden they can actually bear.

The Holiday Hangover

BNPL usage surged during the 2025 holiday season. According to Adobe Analytics, buy now pay later contributed $20 billion in online spending from November 1 through December 31—up 9.8 percent from the prior year. Services like Affirm, Klarna, Afterpay, and PayPal's Pay in 4 made it easier than ever to spread holiday purchases across multiple payments.

The appeal is obvious: instead of paying $400 upfront for a new television, consumers could split the cost into four interest-free payments of $100 each. For cash-strapped shoppers, BNPL offered a way to participate in holiday gift-giving without immediately draining savings or maxing out credit cards.

But those installment payments are now coming due. A consumer who used BNPL for holiday purchases starting in early November is likely already on their third or fourth payment, with final installments stretching into late January or February. And if multiple purchases were made across multiple BNPL services, the cumulative payment burden can quickly become overwhelming.

"BNPL created an illusion of affordability that's now meeting reality. Consumers who made multiple BNPL purchases during the holidays may find themselves with $500 or more in combined payments due in January—on top of their regular bills, credit card minimums, and post-holiday expenses."

— Lauren Saunders, Associate Director at the National Consumer Law Center

The Default Warning Signs

Multiple data points suggest the BNPL sector is approaching stress:

High Miss Rates Already

According to LendingTree research, 41 percent of BNPL users have paid at least one installment late. Among Gen Z users, the rate rises even higher. These aren't hypothetical risks—they're established patterns.

Stacking Behavior

A separate LendingTree survey found that 23 percent of BNPL users have three or more active BNPL loans simultaneously. This "stacking" creates cumulative payment obligations that can quickly exceed borrowers' capacity.

Financial Stress Indicators

The Federal Reserve Bank of New York's household debt data shows increasing stress among lower-income consumers. Delinquency rates on auto loans and credit cards have been rising, suggesting stretched household budgets. BNPL, which often targets similar demographics, may follow suit.

Why BNPL Is Different—And Dangerous

Buy now pay later occupies a unique and somewhat precarious position in consumer finance. Unlike credit cards, BNPL services typically don't charge interest on standard installment plans. This makes them seem safer than credit cards. But several characteristics create risk:

No Credit Check Vulnerability

Many BNPL services perform only soft credit checks or none at all, making credit available to consumers who might not qualify for traditional cards. While this expands access, it also means BNPL providers are extending credit to borrowers with higher default risk.

Invisible to Credit Reports

Until recently, BNPL loans weren't reported to credit bureaus. This meant consumers could accumulate BNPL obligations without affecting their credit scores—but also meant lenders had no visibility into a borrower's total BNPL exposure when making credit decisions.

Late Fees and Consequences

While BNPL services market themselves as fee-free, late payment fees can accumulate. Affirm charges up to $25 per missed payment; Klarna and others have similar structures. Multiple missed payments across multiple services can add up quickly.

The Regulatory Response

Regulators have taken notice of BNPL's rapid growth and potential risks. The Consumer Financial Protection Bureau has issued guidance treating BNPL providers similarly to credit card companies, requiring clearer disclosures and dispute resolution processes.

More significantly, 2026 marks the beginning of mandatory BNPL reporting to credit bureaus. Starting this year, major bureaus will include BNPL payment history in consumer credit files. While this will eventually help consumers build credit through responsible BNPL use, it also means that missed payments will start damaging credit scores—a consequence many BNPL users may not fully appreciate.

International Developments

The U.S. is not alone in grappling with BNPL regulation:

• United Kingdom: From mid-July 2026, BNPL providers will be regulated by the Financial Conduct Authority for the first time, requiring affordability checks and clearer consumer protections.
• Australia: BNPL will fall under the National Consumer Credit Protection Act in 2026, ending previous exemptions from responsible lending requirements.
• European Union: New consumer credit regulations will bring BNPL under EU oversight, requiring credit assessments and standardized disclosures.

What BNPL Users Should Do Now

If you've used BNPL services for holiday shopping, taking stock of your situation now can prevent problems later:

Inventory All Active Loans

Log into each BNPL service you've used and note upcoming payment amounts and dates. Add these to your calendar or budget as fixed obligations.

Prioritize Payments

BNPL payments should be treated as seriously as any other bill. Missing payments triggers late fees and, starting this year, will affect your credit score.

Avoid New BNPL Purchases

If you're already stretched, adding new installment obligations compounds the problem. Focus on paying down existing BNPL loans before taking on new ones.

Consider Alternatives

If you can't make BNPL payments, contact the provider to discuss hardship options. Some services offer payment deferrals or modified plans for struggling borrowers.

The Bottom Line

BNPL services provided genuine value during the holidays, allowing cash-strapped consumers to spread purchases over time. But the bill is now coming due. For the subset of users who overextended themselves—who made multiple BNPL purchases across multiple services without fully accounting for the cumulative payment burden—the first quarter of 2026 could prove financially painful.

The 50 percent default surge that researchers are warning about isn't inevitable. But avoiding it requires BNPL users to treat these obligations with the seriousness they deserve. In the end, buy now pay later is still paying—just on a different schedule. And as millions of Americans are about to discover, those payments eventually come due.