Gen Z is falling into debt with “buy now, pay later” — and the holiday shopping season is when they’re most at risk

Shoppers are in the midst of the gift-giving season, and some may not let inflation or a lack of funds get in the way of sustaining that holiday sparkle.

From grabbing store credit cards for deals to making the most out of Black Friday and Cyber Monday sales, Canadians are now turning to yet another option to afford presents for their loved ones.

Buy now, pay later (BNPL) plans have become a popular alternative to relying on your card, and they’re offered both in-store and online.

However, while Gen Z is particularly invested in the paying-by-installments option, research shows it can still drive them into debt if not used responsibly — here's how.

BNPL is everywhere

While BNPL has appeal across multiple generations, with new players stepping into the fold to widen the accessibility of this payment option.

For example, PayPal is promoting its new installment plan service in Canada (1), running its holiday ad campaign on platforms like TikTok and Facebook and with out-of-home displays, targeting consumers on the streets and on their screens.

Most BNPL platforms don’t report to credit bureaus or require that you have a minimum credit score to apply, adding to their appeal among young consumers who may have limited credit history as well.

A recent H&R Block survey said that Canadian millennials and Gen Z are less likely than older generations to have disposable income and often live paycheque to paycheque (2) — leading them to look for alternative ways to increase their spending power.

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Consider the seasonal factor

As we all know, ’tis the season to overspend — and Canadians are still planning to do some damage with their holiday spending. A PwC survey found Canadians plan to spend an average of $1,675 on entertainment, gifts and travel this season (2).

Meanwhile Black Friday and Cyber Monday remain traditional holiday shopping events. Early data from The Globe and Mail reveals a boost in Canadian commerce during the 2025 Black Friday weekend, increasing by 6–7% year over year (3).

As financial pressures grow, an increasing number of Canadians are turning to BNPL — especially for gifts. Further data from The Globe reveals that 29% of Canadians who used BNPL one or more times a year had a household income of less than $40,000, while 27% of BNPL users made more than $80,000 (4). Additionally, Klarna, one of the biggest players in the installment plan arena, currently has 2.2 million active users in Canada – a 244% increase from 2023.

And that can get risky. While BNPL plans sometimes come with zero interest or late fees — making them a popular alternative to taking on credit card debt — this isn’t always the case depending on the installment plan chosen.

For example, BNPL provider Affirm has an APR that ranges from 0% to 32% depending on your creditworthiness and provincial limits. Its competitor Klarna offers a Pay in 4 option that charges no interest when paid on time — but will charge “delay fees” for missed payments.

Shoppers who use BNPL may be tempted to spend more than they can afford — a risky move given that Canada’s household debt levels are rising. Debt continues on an upward trajectory, outpacing household income — according to Statistics Canada, the average household owes $1.74 for every $1 they earn (5). With higher interest rates and rising monthly payments, many families are feeling financial pressure. This means that additional short-term loans, no matter how small, can make it harder to keep up with essential expenses and stay out of debt.

Gen Z are vulnerable to falling to a debt trap

In Canada, many young shoppers — particularly Gen Z — are attracted to BNPL models because they offer transparent, low-interest or interest-free payment plans that feel more predictable than credit cards. In its 2023 Canadian report, Afterpay claims about two-thirds (68%) of Gen Z users say the installment payment structure allows them to avoid high-interest credit card debt, and 63% say it’s more cost-effective overall (6).

However, this doesn’t mean BNPL services are risk-free. A study by the Financial Consumer Agency of Canada found that 15% of current users admitted to making financial trade-offs — like using overdraft protection, delaying bill payments, or borrowing from friends and family — to meet BNPL repayment demands (7).

So while BNPL may seem like a safer, more flexible repayment system, it could be contributing to higher credit exposure for younger Canadians who have less money in savings but more items on their wishlist than they can afford.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

PayPal (1); PwC (2); The Globe and Mail (3, 4); Statistics Canada (5); Oxford Economics (6); Canada (7)