Users Encountering Issues: Nearly Half of Buy Now, Pay Later Participants Report struggles with overspending and delayed payments
Spreading the Financial Load, but at What Cost?
Struggling with inflation and high interest rates, consumers are turning to Buy Now, Pay Later (BNPL) options to ease their cash flow burden. With the promise of easy credit, flexible payment plans, and no interest rates, it's no wonder BNPL's appeal is strong. But, like with any financial tool, it comes with its caveats.
Our latest survey reveals that almost half of BNPL users have encountered problems, such as overspending or missing payments. While these services can be used strategically as a helpful financial aid, it's crucial to approach them wisely to avoid getting caught in their potential pitfalls.
A Third of Americans Give BNPL a Try
BNPL has made a comeback since its introduction in the 1800s, evolving from installment plans and layaway programs to credit cards. With the rise of online shopping, BNPL apps and services have become increasingly popular. According to our survey, 30% of Americans have tried at least one BNPL service.
The most popular choices among consumers are PayPal Pay In 4/Pay Later (15%), Affirm (11%), Afterpay (9%), and Klarna (9%). Traditional credit card brands aren't far behind, but newer fintechs have gained more traction among users. Only 3% of users have utilized American Express Plan It and/or Chase Pay Over Time, while 4% have used Apple Pay Later (although this service no longer exists since it was discontinued in June 2024).
Under $50,000
BNPL: A Level Playing Field for All Income Levels
31%
Living paycheck to paycheck, many Americans find BNPL an attractive financing option when money's tight. However, our findings show that BNPL usage is relatively consistent across all income levels. While the higher-income earners might have a slight edge, both the lower and higher income brackets (under $50,000 and $100,000 or more) each account for 31% of BNPL users.
| Annual household income | Percentage of Users || --- | --- || Under $50,000 | 31% || $50,000 to $79,999 | 36% || $80,000 to $99,999 | 34% || $100,000 or more | 31% |
$50,000 to $79,999
57% of Users Embrace Installment Payments
36%
BNPL's allure lies in offering the convenience of purchasing goods when desired, followed by flexible payments over time, usually interest-free. This feature makes it appealing to 57% of users who choose to use BNPL for installment payments. This preference is particularly popular among baby boomers (69% among those aged 61-79) who might be more likely to be on a fixed income.
The appeal goes beyond installment payments. Additional reasons for using BNPL include low or no interest rates (40%), payment predictability (31%), and the ease of obtaining credit (26%).
$80,000 to $99,999
Younger generations, like millennials (age 29-44) and Gen Zers (age 18-28), seemed drawn to BNPL's flexibility and the opportunity to build credit. These two age groups were also the most likely to use BNPL, with 38% of Gen Z and 37% of millennials giving it a try at least once.
34%
Taking Precautions to Avoid Common BNPL Issues
Using BNPL can sometimes lead to problems like overspending and missed payments. To minimize these risks, experts suggest adopting good financial habits:
$100,000 or more
- Know Your Terms: Before using any BNPL service, familiarize yourself with the terms, including fees, interest rates, and repercussions for late payments.
- Manage Your Limits: Limit the number of active BNPL agreements to maintain control over your finances.
- Impulse Not Included: Avoid impulse purchases by delaying your decision for at least 24 hours.
- Review Your Spending: Regularly assess your spending habits and adjust as needed to ensure you're not overrelying on BNPL for everyday expenses.
- Consider Alternatives: If you're planning significant purchases, consider delaying them and saving the money instead.
- Research Wisely: Before making a purchase, verify the legitimacy of the seller and the product to avoid potential scams.
- Calendar Reminders and AutoPay: Set reminders for upcoming payments and consider enrolling in auto-pay for a stable income.
- Explore Lower-Interest Options: If you need financing for substantial purchases, research installment loans with lower interest rates to balance your budget better.
31%
Incorporating good financial habits with BNPL services can ensure the convenience remains a tool for improved cash flow instead of a source of debt. Be smart, be informed, and enjoy the benefits of stress-free shopping with BNPL.
- Home equity could potentially be utilized to secure lower interest rate personal-finance options, such as auto loans, rather than relying on Buy Now, Pay Later services that may lead to debt.
- Technology has made it convenient for consumers to manage their finances through social-media platforms and fintech apps, including BNPL services like Affirm and Afterpay, but it's important to approach these tools thoughtfully to minimize potential pitfalls.
- Entertainment expenses, like streaming services or movie tickets, can be more manageable when paid for over time using Buy Now, Pay Later services, but it's crucial to practice smart financial habits to avoid accumulating debt.
