The Zip Co Ltd (ASX: ZIP) share price had a month to forget in January.
Over the month just past, the S&P/ASX 200 Index (ASX: XJO) gained 1.8%.
As for Zip, shares in the ASX 200 buy now, pay later (BNPL) stock closed out December trading for $3.29. When the closing bell sounded on 30 January, shares were changing hands for $2.65 apiece.
This put the Zip share price down a painful 19.4% over the first month of 2026. And it saw the stock take the ignominious title of the worst performer on the ASX 200 in January.
So, what went wrong for the BNPL stock?
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Why did the Zip share price come under pressure?
There was no fresh news out from the company in January that would have been likely to spook investors.
In fact, you might have expected the Zip share price to get a boost after United States President Donald Trump announced his desire to impose a 10% cap on credit card interest rates.
As credit card companies and BNPL companies are directly competing for the same customers, an interest rate cap could see credit card companies impose stricter lender criteria, which could lead to customers turning to the services offered by companies like Zip.
So, I think there are two more basic reasons why Zip stock went backwards in January.
First, the stock has been on an absolute tear since plumbing one-year plus lows of $1.19 on 7 April last year.
Running the maths, at the $3.29 31 December closing price, shares had surged 176.5% from those lows. So, some profit-taking is not unexpected. And even at January's closing price, investors who bought at the low would still have been sitting on gains of 122.7%.
The second reason I think the Zip share price took a hit in January is the outlook for interest rates in the company's core markets of the US and Australia.
As you're likely all too aware, rates in Australia may well go up (perhaps even later today following the RBA meeting). And while we may see some more easing from the US Federal Reserve, January saw the market pare back the odds of multiple rate cuts from the world's most influential central bank.
That's important because BNPL stocks like Zip have proven to be highly sensitive to interest rate moves.
What's been sending the ASX 200 BNPL stock soaring?
With the Zip share price currently back up to $2.74, the stock is up 20.4% over 12 months and up 129.8% from its April lows.
Investors have taken note of the company's rapid growth potential. Zip reported a 98.1% year-on-year increase in its Q1 FY 2026 cash earnings before interest, tax, depreciation and amortisation (EBTDA) to $62.8 million.
The company also reported a 5.3% increase in its active customers to 6.4 million.
