Buy now, pay later services have experienced substantial growth as Americans turn to short-term installment financing to manage costs beyond discretionary purchases. Federal Reserve data indicates that BNPL providers originated nearly $157 billion in consumer credit products in 2025, representing a significant increase from nearly $116 billion the previous year. A survey conducted earlier in July found that 44% of Americans expect to apply for a BNPL loan within the next six months, with 13% planning to take out three or more loans during that period.
The use of BNPL services has expanded into essential categories that were traditionally funded through other means. According to a March survey, 29% of BNPL users have used these services for groceries, more than double the 14% figure from 2024. Additional findings show that 18% used BNPL loans for car repairs or maintenance, 13% for rent payments, 42% for medical or dental care, and 39% for utility bills. This shift reflects broader affordability pressures facing consumers amid inflation and rising costs across multiple sectors.
However, the increased reliance on BNPL services has accompanied concerning trends in payment performance. Nearly half of BNPL users, representing 47%, reported making late payments on these loans in the past year, compared to 34% in 2024. Most BNPL loans operate on a pay-in-four structure with no interest, typically requiring a 25% down payment followed by three equal installments over six weeks. Some providers offer alternative structures with interest and longer repayment periods, with late fees ranging from $7 to $8 per payment and interest plus financing fees reaching up to 36%.
Industry representatives defend BNPL services as tools for managing the current affordability crisis, emphasizing transparent terms and flexible payment options. Financial Technology Association representatives contend that splitting costs into installments represents sound financial management. Nevertheless, credit counseling experts warn that missed BNPL payments can create cycles of debt, particularly among consumers who have exhausted traditional credit options. The growth in interest-bearing BNPL loans, which accounted for over 37% of annual loan issuance in 2026 compared to less than half that share in 2021, has raised concerns about whether such products effectively function as high-cost borrowing vehicles similar to payday loans.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI