Buy now, pay later services have experienced significant growth as consumers increasingly rely on short-term installment financing to manage essential expenses rather than discretionary purchases. According to Federal Reserve estimates, BNPL providers originated nearly $157 billion in consumer credit products in 2025, a substantial increase from nearly $116 billion in 2024. Survey data indicates substantial consumer interest in these services, with 44% of Americans polled earlier in July expecting to apply for a BNPL loan within the next six months, including 13% anticipating three or more applications.
The shift toward BNPL for basic necessities reflects broader financial pressures on American households. A March survey found that 29% of BNPL users applied for loans to purchase groceries, more than double the 14% figure from 2024. Additional data from a July survey by Protect Borrowers revealed that 42% of BNPL loan users accessed these services for medical or dental care, while 39% used them to cover utility bills. This trend emerges amid elevated consumer debt levels, with credit card debt in the U.S. reaching $1.25 trillion in the first quarter, representing a 5.9% increase from the prior year.
Payment delinquencies pose growing concerns for both consumers and industry observers. Nearly half of BNPL users, 47%, reported making late payments on these loans in the past year, up from 34% in 2024. Credit counseling experts warn that missed payments can create cycles of escalating debt. Late fees on some BNPL services range from $7 to $8 per payment, while interest and financing fees can reach up to 36%, potentially creating effective annual percentage rates exceeding 100% when compounded with late fees.
The BNPL industry structure has evolved toward higher-cost offerings. In 2026, interest-bearing installment loans accounted for over 37% of annual BNPL loan issuance, nearly double the share in 2021. While traditional BNPL products typically feature four interest-free installments spread over six weeks, many providers now offer alternative structures with biweekly payments and interest charges. Industry representatives contend that BNPL services provide valuable flexibility for consumers facing affordability challenges, while advocates argue the fee structures can transform small loans into products resembling payday lending.
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