Americans broke a record for spending on Black Friday, but it's just hiding a bigger problem for the economy

Americans set an online spending record on Black Friday, but they may be accruing more debt.

• Online shopping on Black Friday totaled $9.8 billion, up 7.5% from last year.
• Many are delaying the cost as buy now, pay later programs are expected to have their biggest month ever.
• This could lead to bigger problems in the spring when these bills start coming due.

Americans set an online spending record on Black Friday, but a closer look at the numbers and trends suggests consumer spending is not as strong as it looks — and may be masking the bigger problem of accruing more debt.

According to Adobe, which tracks online sales, online shopping on Black Friday totaled $9.8 billion, up 7.5% from last year. Adobe estimates US shoppers will further spend as much as $12.4 billion on Cyber Monday.

And these estimates may be low: Mastercard said e-commerce sales were up 8.5% on Black Friday, and another report from Salesforce said US online sales grew by 9%, year over year.

Lastly, it was the biggest Black Friday in Amazon's history, Beryl Tomay, vice president of the company's "last mile" delivery unit — which focuses on logistics — told CNBC on November 27.

While the increase in spending was predicted for the holiday season, what is worrisome is how Americans are paying for the items. Many are paying via "buy now, pay later" platforms such as Klarna or Afterpay, which let shoppers pay in installments every week or month. Compared to last year, Klarna observed nearly a 30% increase in orders placed by US shoppers on Black Friday this year on items such as food mixers, TVs, and coffee makers, according to data shared with Business Insider.

As home prices remain around record highs, and as inflation still remains above the Federal Reserve's 2% target, many Americans are worried about their finances. The end of the student loan pause, rising rents, and record-high credit card debt have further mounted pressure. This has pushed some American shoppers to rely more on buy now, pay later programs so they have more flexibility when their budget is tight.

Many aren't paying yet and don't plan to for a while

According to Adobe, buy now, pay later financing was up 47% this Black Friday compared to last year. In 2022, about 10% of purchases on the day after Thanksgiving used buy now, pay later, according to the Federal Reserve Bank of Atlanta.

As of Friday, total spending in November on buy now, pay later deals has already reached $6.5 billion, according to Adobe, and the company is projecting it to reach $9.3 billion — the largest month on record.

Americans on the whole, though, have not backed down from spending over the last year, even as Americans' savings accounts deplete. Consumer spending accounts for around 70% of US economic activity.

However, this comes at a time when Americans also have a record $1.3 trillion in credit card debt.

Mark Luschini, chief investment strategist at the financial advisor firm Janney Montgomery Scott said on "Mornings With Maria Bartiromo" that the increased use of buy now, pay later programs might be a sign that the consumer is starting to crack.

Luschini noted that buy now, pay later programs, when coupled with recent upticks in credit card delinquencies and accounts that are behind on payments, is a sign that some consumers — those with credit card debt and auto loans — are beginning to buckle under the pressures of the US economy.

To be sure, there are benefits to using buy now, pay later. It can provide credit to some Americans who might not otherwise qualify. According to Adobe, about one-third of buy now, pay later users had a credit score below 620, had a credit application rejected, or were delinquent on a loan in the past 12 months.

Buy now, pay later also allows people to borrow less expensively as they get the pricing interest-free if paid off in time. Indeed, the Fed's "2022 Survey of Household Economics and Decisionmaking" found that 83% of respondents paid off their buy now, pay later programs on time.

That still leaves 17% who do not pay off the debt in time and are adding more interest to their ledgers.

In addition, a Social Science Research Network study found that some consumers pay off their buy now, pay later with credit cards, which just trades a 0% interest rate for rates that are the highest going back to the early 1980s and are often well above 20%.

Struggling to pay off the debt in time or just shifting it to high-interest credit cards could be driven by what some have called a "debt snowball," where it is easier to lose track of the total amount of monthly payments that are being accrued through buy now, pay later programs.

And this could lead to bigger problems in the spring when these bills start coming due.

"The lower-end consumer, they are really tapped out, and 40 to 50% of the folks in the country are having problems making ends meet," said CEO Michael Landsberg of Landsberg Bennett Private Wealth Management during an appearance Monday on CNBC's "Power Lunch discussing buy now, pay later programs. "That doesn't mean they are not going to spend for Christmas, but I think January, February, March, you are going to see a real slowdown in the retail space."

Compounding the problem is that people tend to spend more when using buy now, pay later programs, suggesting an overconfidence in what they can afford. A second research paper from the Social Science Research Network found that consumers spent 20% more when buy now, pay later was offered, especially on retail items.

Spending was down before Black Friday

Additionally, even though "Black Friday" deals started much earlier this year, more people than usual waited until Friday to make their purchases, suggesting they are feeling pressure to find the best possible deals.

Kraig Foreman, shipping company DHL's supply chain e-commerce president noted Monday on CNBC's "Worldwide Exchange" that sales before Friday were slower compared to previous years.

"We actually saw softer sales year over year, coming into Friday, which was surprising," Foreman said. "Shoppers know what they want and know what they want to buy and were waiting for the best possible deal as they are trying to be really conscious with their money."