Study: Buy Now, Pay Later Use Declines for Third Straight Year
Fewer Americans are using buy now, pay later (BNPL) services despite a stretch of intense inflation that stressed finances, according to a new survey from The Motley Fool Ascent.
Thirty-five percent of Americans surveyed by The Motley Fool Ascent reported having at one point used buy now, pay later for a purchase. That's down from 50% of respondents in 2022 and 56% in 2021.
However, nearly half (48%) of buy now, pay later users are still turning to these installment plans to finance purchases that wouldn't otherwise fit their budget. And 26% of respondents who have used BNPL have had a late or missed payment.
Read on for a look into how buy now, pay later use has changed over time.
- Fewer Americans are using buy now, pay later services. In a survey from The Motley Fool Ascent, 35% of respondents reported having used buy now, pay later services, down from 50% in 2022 and 56% in 2021.
- 48% of respondents that use buy now, pay later do so to make purchases that wouldn't otherwise fit their budget.
- 26% of respondents that use buy now, pay later have had a late or missed payment.
35% of Americans have used buy now, pay later
Buy now, pay later usage among American adults surveyed by The Motley Fool Ascent declined from 50% in 2022 to 35% in 2023.
Editor's note: The usage of buy now, pay later services among American adults shows considerable variation according to survey results, indicating anywhere from 12% to more than 60% have used buy now, pay later.
That percentage is more in line with data from 2022 reported by the Federal Reserve, which found that 12% of Americans used buy now, pay later and the Consumer Financial Protection Bureau, which found that 17% of Americans used these installment plans.
Consistent with previous years, BNPL is more popular with younger Americans. A third of Americans aged 45 to 54 surveyed by The Motley Fool Ascent and just 19% of those over 54 reported having used buy now, pay later, compared to 50% of those aged 25 to 44.
|Age||Percent who have used buy now, pay later|
|18 to 24||42%|
|25 to 34||50%|
|35 to 44||50%|
|45 to 54||33%|
26% of Americans who have used buy now, pay later have missed or made a late payment
Twenty-six percent of Americans surveyed by The Motley Fool Ascent who have used buy now, pay later have made a late payment or missed a payment, down from 33% in 2022.
As in previous years, younger Americans are more likely to have missed a payment or made a late payment.
|Age||Percent that have missed or made a late payment among BNPL users|
|18 to 24||26%|
|25 to 34||31%|
|35 to 44||28%|
|45 to 54||20%|
Editor's note: The percentage of Americans who have missed or made a late buy now, pay later payment shows considerable variation according to survey results, with results ranging from 7% to 56% of BNPL users.
Understanding interest and late fees in buy now, pay later services
Most buy now, pay later services advertise 0% interest -- but that can be a bit misleading. If you make a late payment, you'll incur at least a late fee. And you may have to pay a finance fee, too.
Here are the interest rates and late fees we dug up from buy now, pay later services' terms and conditions:
|BNPL service||Interest rate||Late fees|
|Affirm||Up to 36%||None|
|Afterpay||0%||Up to 25% of your initial order value (per purchase)|
|FuturePay||$1.25 for every $50 in unpaid balance*||Up to $38 (per payment)|
|Klarna||0%||Up to $7 (per payment)|
|PayPal Credit||28.09% variable rate||Up to $41 (per payment)|
|Pay In 4||0%||None|
|Zip||0%||Up to $10 per purchase|
|Sezzle||0%||$10 per payment|
|Splitit||0%||None (though your credit card will charge late fees)|
The promise of making purchases with no interest makes it seem like buy now, pay later is the clear winner over traditional credit. But is BNPL really better than a credit card?
The answer is complicated and largely depends on what consumers are looking for. For example, using a buy now, pay later service can't help your credit score, but it can hurt it.
Here are a number of factors that American consumers should take into account when deciding between the two:
|Buy now, pay later||Credit cards|
|Average interest rate||0%||20.68% as of May 2023|
|Typical late fee||$20 to $30 per payment||$28 for first late payment, $39 for subsequent late payments, according to CFPB|
|Typical repayment period||6 weeks to 12 months||One month to repay without interest, up to 24 months with an introductory 0% APR card|
|Typical frequency of payments||Every two weeks to once a month||Once a month|
|Reports to credit bureaus||Late payments (reduces credit score)||On-time and late payments (may improve or reduce credit score)|
|Credit checks||Not usually||Always|
Note that these are typical figures, and not set in stone, especially for buy now, pay later programs, which vary a great deal.
If consumers are looking to improve their credit score or have more flexibility in their repayment period, a credit card with a 0% introductory APR may be a better option. Many credit cards provide perks like credit monitoring, purchase protection, and rewards programs that BNPL providers don't yet offer, as well.
It's also worth pointing out that buy now, pay later programs don't have the same regulatory oversight as credit cards. According to Consumer Reports, some BNPL users have had trouble with disputes and returns, for example.
27% of buy now, pay later users use BNPL more often than credit cards
Just over a quarter of Americans surveyed by The Motley Fool Ascent use buy now, pay later more than their credit card. That's down from 48% in 2022.
In line with other findings on buy now, pay later usage, younger respondents are more likely to use buy now, pay later more than their credit card than older respondents.
|Age||Percent that use BNPL more often than credit cards among BNPL users|
|18 to 24||31%|
|25 to 34||38%|
|35 to 44||36%|
|45 to 54||27%|
62% of buy now, pay later users think it could replace their credit cards
Buy now, pay later services function much like a credit card, but they have some distinct advantages like 0% interest and no credit check (usually, anyway).
As such, 27% of respondents surveyed in 2022 agree that BNPL services could eventually take the place of their credit cards and would like for that to happen.
Meanwhile, 35% say BNPL services could replace their credit cards in theory, but they'll probably keep using their cards anyway. And 38% say BNPL services can't replace their credit cards.
Should buy now, pay later replace consumers' credit cards?
Everyone has their own needs when it comes to financial products. But many of the benefits that buy now, pay later offers are also available from top-tier credit cards.
In addition to things like a 0% introductory APR, credit card owners often have access to credit perks, purchase protections, travel benefits, and more. Plus they help users build credit, which buy now, pay later programs don't.
Of course, if a consumer isn't able to get approved for a credit card, a buy now, pay later plan may be their only option if they can't save up enough cash for a purchase. And many people just don't like to use credit cards, in which case they need an alternate form of credit, like BNPL.
The most popular buy now, pay later providers
The Motley Fool Ascent asked respondents who have used buy now, pay later which providers they've made purchases with. Here are the percentages that have used each of the following services:
|Buy now, pay later provider||Percent of respondents among buy now, pay later users|
|PayPal Credit/Pay in 4||35%|
48% of buy now, pay later users use it to make purchases that don't fit their budget
The top reason respondents use buy now, pay later is to make purchases that wouldn't otherwise fit their budget. That was one reason chosen by 48% of buy now, pay later users surveyed by The Motley Fool Ascent, up from 45% in 2022.
Here's a full breakdown of why Americans surveyed use buy now, pay later:
|Reason for using buy now, pay later||Percent of respondents among buy now, pay later users|
|To make purchases that wouldn't otherwise fit my budget||48%|
|To avoid credit card interest||33%|
|To borrow money without a credit check||24%|
|Because I can't get approved for a credit card||15%|
|Because I don't like to use credit cards||15%|
|Because my credit cards are maxed out||14%|
The Federal Reserve also asked Americans why they used buy now, pay later as part of the 2022 Survey of Household Economics and Decisionmaking. These are the results:
- Wanted to spread out payments: 87%
- Convenience: 83%
- Avoid interest charges: 59%
- Only way I could afford it: 56%
- Did not want to use a credit card: 54%
- Wanted a fixed number of payments: 46%
- Only accepted payment method I had: 21%
Electronics remain the most popular use of buy now, pay later
Buy now, pay later is a fairly standard option for consumers in most stores. Here are the most common types of products bought with buy now, pay later, among those surveyed.
- Electronics: 46% (down from 47% in 2022)
- Clothing and fashion accessories: 46% (up from 43% in 2022)
- Furniture and appliances: 31% (no change from 2022)
- Household essentials: 22% (down from 27% in 2022)
- Personal care and cosmetics: 22% (down from 28% in 2022)
- Groceries: 19% (down from 24% in 2022)
- Books, movies, music, or games: 13% (down from 22% in 2022)
- Fitness equipment: 11% (down from 15% in 2022)
- Other: 8% (up from 2% in 2022)
Electronics being the most common category for buy now, pay later purchases is consistent with most respondents using buy now, pay later to buy something otherwise outside of their budget. The same could be said for clothing and fashion accessories and furniture and appliances, the latter of which can be expensive.
While there was a slight decline in the percentage of respondents who used buy now, pay later to purchase staples like household essentials and groceries, around a fifth still did. That suggests a decent number of consumers are using buy now, pay later for at least some regular shopping.
32% of buy now, pay later users use it once a month or more
Many people swipe a credit card on a daily basis. How does BNPL compare? Here's what our survey respondents had to say:
|Frequency of buy now, pay later use||Percent among respondents who have used buy now, pay later, 2023||2022||2021||2020|
|At least once a week||5%||19%||18%||19%|
|Once a month||26%||19%||18%||19%|
|Once every three months||25%||23%||19%||23%|
|Once every six months||17%||17%||19%||17%|
|Once a year or less frequently||16%||22%||25%||22%|
Respondents reported using BNPL less often in 2023 than previous years. The percentage of respondents who use buy now, pay later once a week or more and once a month declined from 2022.
Most buy now, pay later users have a single payment per month
Since only about one-third of respondents use BNPL services once a month or more frequently, most aren't juggling an unhealthy number of monthly payments. But still, 8% of respondents surveyed in 2022 say they make five or more BNPL payments in an average month.
By contrast, 23% of respondents from 2022 made zero payments in an average month, 19% made one, and 23% made two.
Meanwhile, there's a wide range of monthly payments consumers are taking on. Here's how they break down among our survey respondents:
|Average total monthly BNPL payment||Percentage of respondents|
|$50 or less||25%|
|$51 to $100||26%|
|$101 to $250||21%|
|$251 to $500||15%|
|$501 to $1,000||8%|
Respondents aged 18 to 24 are the most likely to be grappling with monthly payments over $250 -- 38% of our respondents from 2022 in this age group reported these payments.
While it's not necessarily bad to have a large buy now, pay later payment each month -- it depends entirely on your budget and how you're using it -- users under the age of 24 are probably earning the least amount of money. That $250 or more they're putting towards BNPL payments could put them in a difficult financial situation.
26% of buy now, pay later users heard about it on social media
Because BNPL is a newer concept than credit cards, fewer people know about it. Among those who have heard of BNPL, here are their sources:
- Social media: 26%
- Advertisement: 21%
- Friend or family member: 17%
- Digital store: 17%
- BNPL payment provider: 7%
- Brick-and-mortar store: 6%
- Other: 5%
Interestingly, BNPL services are gaining traction in the corporate world, too, with executives now talking about it more than ever before.
Not surprisingly, consumers under 54 are nearly twice as likely to have heard about BNPL via social media than those over 54 (27% and 14%, respectively).
Consumers over 54 are most likely to learn about BNPL through a family member or friend (25%).
How well do consumers understand BNPL services?
The concept behind BNPL is pretty clear -- agree to the terms of your provider's agreement, purchase your items, and make your payments as per the schedule you've signed up for. If you stick to that plan, you're golden. If you don't make your payments on time, you'll risk interest and fees.
But despite the fairly straightforward nature of BNPL services, many respondents in 2022 felt that they did not understand the terms and conditions of buy now, pay later programs:
- 7% gave themselves a 1 (they don't understand BNPL at all)
- 7% gave themselves a 2
- 20% gave themselves a 3
- 28% gave themselves a 4
- 37% gave themselves a 5 (they understand BNPL services very well)
This indicates a slight boost in understanding since we asked people if they understood how buy now, pay later works in March 2021:
Not surprisingly, consumers who have used a BNPL service are more likely to say they fully understand how these programs work.
Similarly, those who haven't used BNPL are far more likely to say they don't understand these programs at all (12.5% of non-users compared to 2.2% of users).
It's also worth noting that despite BNPL services being the most popular among consumers aged 18 to 24, this age group is the least likely to say they understand the terms and conditions involved very well (33%).
Most respondents are also aware that buy now, pay later is similar to other types of credit. Nearly three-fourths (74%) of those surveyed in 2023 consider BNPL to be a form of debt.
41% of buy now, pay later users trust BNPL providers more than credit card companies
There's a lot of mistrust out there when it comes to credit card companies. But do people feel the same way about BNPL providers?
Forty-one percent of buy now, pay later users trust BNPL providers more than credit card providers. That's up from 30% in 2022.
In 2022, The Motley Fool Ascent asked about the trustworthiness of credit card companies and BNPL providers when it comes to personal information and fair business practices.
That year, 48% of respondents said they trusted both equally with their personal information, and the rest were evenly split between "buy now, pay later companies are more trustworthy" and "credit card companies are more trustworthy."
Buy now, pay later users showed a different pattern when asked about fair business practices, though:
- 13% trust BNPL providers a lot more than credit card companies when it comes to fair business practices
- 17% trust BNPL providers more than credit card companies
- 47% trust BNPL providers and credit card companies equally
- 13% trust credit card companies more than BNPL providers
- 10% trust credit card companies a lot more than BNPL providers
Thirty-one percent of American consumers who have used a buy now, pay later service trust those services more than credit card companies when it comes to fair business practices. Only 22% said credit card providers were more trustworthy in business.
The traditional banking sector has gotten some bad press over the past few years, which may have led to this drop in trust. The same drop wasn't reflected in consumers' feelings about their personal data, though, which was the subject of much of that bad press.
Has buy now, pay later usage plateaued?
For the third year in a row, the percentage of respondents to The Motley Fool Ascent's BNPL survey who have used buy now, pay later services has declined.
Despite that, it's clear that buy now, pay later is a payment option that consumers expect to see from most retailers, either online or in-person.
Whether buy now, pay later becomes more convenient and trustworthy for the majority of Americans than simply swiping a credit card remains to be seen, as does whether a majority of consumers ever opt to use BNPL for everyday purchases like groceries.
Another important factor for consumers is their willingness to give up on the benefits credit cards provide, like cash back, points, and credit score upside for making on time payments.
This field is changing fast -- so we'll be sure to keep an eye on it and report back.
The Motley Fool Ascent surveyed 2,000 American adults via Pollfish on July 19, 2023. Results were post-stratified to generate nationally representative data based on age and gender. Pollfish employs organic random device engagement sampling.
Separate surveys with the same methodology were carried out on June 29, 2022, March 10, 2021, and July 6, 2020.
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