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Amid rising interest rates and inflation, more American consumers are expected to use “buy now, pay later” payment plans heavily this holiday season.

The short-term loans allow shoppers to make an initial payment at checkout, then pay the rest in installments, typically over a few weeks, even months. They also often incur zero interest but charge fees for missed or late payments.

They often appeal to those buying multiple gifts for family and friends during the holidays, especially if they are balancing other debt, such as student loans and credit cards.

According to the Federal Reserve Bank of New York, younger consumers and those with difficulty accessing credit use ‘buy now, pay later’ most frequently, and if used responsibly, the installment plans increase financial inclusion.

However, the Federal Reserve and some analysts stressed that key features of the plans could make borrowing too easy and lead to excessive debt for some consumers.

A recent Adobe Analytics report on online shopping showed that short-term installment loans drove US$6.4 billion of online spending in October, up six percent year-on-year.

Adobe forecasts ‘buy now, pay later’ usage to peak in November with spending totaling $9.3 billion, including a single-day record of $782 million on Cyber Monday, and estimates one in five Americans plan to use such plans to purchase holiday gifts.

Vivek Pandya, lead analyst for Adobe Digital Insights, said, “Rising interest rates, inflation in food prices, and resuming student loan repayments” have increased costs for consumers, but “data has shown that the consumer remains resilient heading into the big holiday season and they are embracing every opportunity to manage their budgets in more efficient ways.”

Demishia Alford, 26, of Greensboro, North Carolina, said she uses ‘buy now, pay later’ for household goods, clothes and plane tickets.

“I try to stay on top of it, especially in today’s economy. Debt creeps up on you,” she said.

As pay-in-installment loans often go unreported to credit bureaus, and the companies do not report to one another, lenders face an underwriting challenge from ‘buy now, pay later,’ said Kevin King, vice president of credit risk at LexisNexis Risk Solutions.

“Right now, it is really tough for BNPL lenders to know that Kevin may have taken out a loan from four other BNPL lenders earlier this week. That can let consumers trap themselves in debt,” he said.