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Buy Now, Pay Later: Necessity Not Choice
20 May
Summary
- BNPL use surged 970% between 2019 and 2021.
- Many use BNPL out of necessity, not preference.
- Late fees and potential credit score impacts loom.
Buy Now, Pay Later (BNPL) services have transformed into a staple for American shoppers, driven by financial strain. Between 2019 and 2021, the number of BNPL loans in the U.S. grew by 970%, reaching 180 million, with the dollar volume exceeding $24.2 billion.
Originally designed for ease and credit building, BNPL's frictionless nature now appeals to lower-income households and those worried about finances. Research indicates these plans are often used out of necessity, with a significant portion of users unable to afford purchases otherwise. This reliance is higher among those with lower credit scores.
Despite the appeal of interest-free installments, missed payments can incur substantial late fees, averaging $9.99. FICO will soon include BNPL data in credit scores, potentially impacting those with late payments. This adds to the record $19 trillion in U.S. consumer debt, with delinquencies at historic highs, particularly among low-income earners.
