The final tallies are in, and the 2025 holiday shopping season delivered exactly what retailers hoped for: record-breaking sales that surpassed $1.29 trillion globally and $294 billion in the United States alone. But a closer examination of how Americans paid for this spending spree reveals troubling signals about the financial health of the consumer economy.

According to data from Salesforce, Mastercard SpendingPulse, and Adobe Analytics, the holiday shopping period from November 1 through December 31 exceeded even the most optimistic projections. Holiday sales climbed 3.9% compared to the previous year, with online spending jumping 6.8% to $257.8 billion.

The headline numbers suggest a robust consumer. The details tell a more complicated story.

The BNPL Explosion

Perhaps no trend captures the current state of consumer finance better than the meteoric rise of buy now, pay later services. According to Adobe data, BNPL usage during the holiday season surged 9.8% year-over-year to $20 billion—a record that raises serious questions about what happens when those installment payments come due.

"We're seeing consumers stretch further and further to maintain their spending levels," says Ted Rossman, senior industry analyst at Bankrate. "BNPL allows people to spread payments out, which can be helpful, but it also masks the true cost of consumption and can lead to debt spirals."

The concern isn't theoretical. Research from Sooth, a financial analytics firm, projects that BNPL default rates could increase by as much as 50% in the first quarter of 2026 as holiday bills come due.

Credit Cards Under Strain

Beyond BNPL, traditional credit card usage also showed signs of strain. Bank of America Institute data revealed that consumers were more reliant on revolving credit during the holiday season than in previous years, with credit card transaction volumes outpacing debit card growth.

This comes at a particularly challenging time. With President Trump's proposed 10% credit card interest rate cap facing fierce industry opposition and uncertain legislative prospects, many consumers continue to pay rates exceeding 20% on their holiday purchases. The disconnect between surging credit card usage and high interest rates suggests consumers may be prioritizing short-term spending over long-term financial health.

The Discount Dependency

Another telling detail from the holiday data: the largest spending increases came in low-cost categories. Thrift shops saw traffic increase 11.7% year-over-year, while off-price retailers like TJ Maxx and Ross posted gains of 6.6%. In contrast, luxury chains and department stores managed meager growth of just 1.8%.

This bifurcation suggests that while consumers wanted to participate in holiday spending, many were doing so on tighter budgets. The willingness to trade down to discount retailers while still maintaining overall spending levels indicates a consumer who is determined to spend but increasingly constrained in how much they can afford.

The E-Commerce Surge

If there's an unambiguous bright spot in the data, it's the continued shift to online shopping. Digital commerce represented 27% of all holiday transactions, with smartphone purchases accounting for a remarkable 56.4% of online spend—up from 54.5% in 2024.

Cyber Monday remained the biggest online shopping day of the year at $14.25 billion, up 7.1% from the prior year. But Black Friday's growth actually outpaced it, with online sales jumping 9.1% to $11.8 billion, as retailers successfully extended the Thanksgiving shopping weekend.

"Mobile commerce has fundamentally changed how people shop," notes Vivek Pandya, lead analyst at Adobe Digital Insights. "The convenience factor is now so strong that consumers are making major purchases from their phones while sitting on the couch."

What the Data Means for 2026

The combination of record spending and increasing debt reliance creates a complex outlook for the year ahead. On one hand, consumer willingness to spend suggests confidence in the economy. On the other hand, the mechanisms funding that spending—BNPL, credit cards, and discounts—suggest underlying stress.

Retail analysts are watching several indicators closely:

  • Return rates: Post-holiday returns are expected to spike, with some estimates suggesting return volumes could be 20% higher than last year. High return rates would cut into the apparent spending gains.
  • Credit delinquencies: The Federal Reserve has already noted rising credit card delinquency rates. If the holiday debt hangover proves worse than expected, delinquencies could accelerate.
  • Q1 spending: Historically, first-quarter retail spending softens as consumers pay off holiday bills. The magnitude of this year's softening will reveal how stretched consumers actually became.

The Retailer Perspective

For retailers, the holiday results were largely positive but came with caveats. Companies that invested heavily in omnichannel capabilities—allowing customers to buy online, pick up in store, or return through any channel—outperformed those with less flexible operations.

The intense discounting environment also pressured margins. While top-line sales grew, profitability may not have kept pace. Earnings reports over the coming weeks will reveal whether retailers managed to translate higher revenue into higher profits.

Consumer Sentiment Disconnect

One of the puzzles of the holiday season was the disconnect between consumer spending and consumer sentiment. The University of Michigan's consumer sentiment index remains at historically depressed levels, hovering below readings seen during the Great Recession.

Yet spending continued unabated. This gap between how consumers say they feel and how they actually behave suggests either that sentiment surveys are capturing anxieties that don't translate into spending decisions, or that consumers are spending despite their concerns—potentially a more worrying interpretation.

Looking Ahead

The $1.29 trillion holiday season will enter the record books as a success. But the manner of that success—fueled by debt financing, discount seeking, and a willingness to spend despite financial anxiety—suggests the consumer economy is more fragile than the headline numbers imply.

"Consumers have proven remarkably resilient," says Mark Zandi, chief economist at Moody's Analytics. "But resilience isn't unlimited. At some point, if incomes don't keep pace with spending and debt continues to accumulate, something has to give."

The first quarter of 2026 will provide the answer to whether holiday spending represented genuine economic strength or a final burst of optimism before reality sets in.