Buy now, pay later (BNPL) has become a hot topic in the financial world.
Affirm, a BNPL provider, went public in January 2021. They've launched a buy now, pay later debit card. Brick-and-mortar stores are increasingly offering BNPL options. New buy now, pay later providers are popping up all the time. If you read financial news, you can't help but hear about buy now, pay later.
In March 2021, The Ascent surveyed 2,000 Americans about their buy now, pay later habits. We followed that survey with another in June 2022, and the results show a slight decline in the use of BNPL. Here's what else we found.
- 50% of consumers have used a buy now, pay later service, down from 56% last year.
- Buy now, pay later usage remained steady for respondents aged 18 to 44 but fell for respondents aged 45 to 54 and those older than 54 between March 2021 and June 2022.
- 39% of respondents who have never used BNPL say they're at least somewhat likely to use it within the next six months.
- 33% of buy now, pay later users have made a late payment or incurred a late fee. 47% of BNPL users say they are at least somewhat likely to make a late payment within the next year.
- 67% of buy now, pay later users think BNPL could replace their credit cards, though only about a third want that to happen.
- PayPal's buy now, pay later services are the most commonly used among providers, with 53% of users saying they've used the brand's BNPL options.
- Buying electronics is the most common use of buy now, pay later, with 47% of users saying they've used it for that reason.
- 38% of buy now, pay later users use BNPL once a month or more.
- Americans understand BNPL terms and conditions better than they did last year, with a nearly 25% increase in the number of people who say they understand it at least somewhat well.
50% of Americans have used a buy now, pay later service
In March 2021, we found that 56% of American adults had used a BNPL service. Since then, that number has declined slightly – 50% of Americans now say they've used one of these services. For comparison, the percentage of Americans that had used a BNPL service grew from 38% to 56% between July 2020 and March 2021.
Here's how BNPL usage breaks down by age:
|Age range||Percentage who had used a buy now, pay laterservice, July 2020||Percentage of consumers who have used a buy now,pay later service, March 2021||Percentage of consumers who have used a buy now,pay later service in, June 2022||Percentage change, July 2020 to March 2021||Percentage change, March 2021 to June 2022|
|18 to 24||38%||61%||61%||+62%||-1%|
|25 to 34||47%||60%||59%||+28%||-1%|
|35 to 44||50%||61%||60%||+21%||-1%|
|45 to 54||42%||53%||45%||+26%||-15%|
BNPL usage declined across all ages in 2022 following explosive growth between 2020 and 2021.
Usage declined by about 1% among respondents aged 18 to 44.
Older respondents saw a more dramatic drop-off. Fifteen percent fewer respondents aged 45 to 54 reported using BNPL services. Thirty-eight percent fewer respondents over 54 said they’ve used BNPL services.
Men are also more likely than women to use a BNPL service, with 57% of male consumers taking advantage of this payment option compared to 45% of women.
14% of non-users are likely to use buy now, pay later in the next 12 months
Only 14% of respondents who haven’t used BNPL services say they are likely or very likely to use BNPL in the next year. That’s down from 18% in 2021.
- 5% of people who have never used buy now, pay later are very likely to use a BNPL service in the next six months
- 9% are somewhat likely to use BNPL in the next six months
- 36% are neutral or unsure
- 21% are somewhat unlikely to use a BNPL service in the next six months
- 29% are very unlikely to use BNPL in the next six months
So what's holding people back from BNPL? Here's what people who haven't used one of these services said:
- 44% say they can use cash or a debit card instead
- 29% say they can fall back on credit cards
- 9% are hesitant to use buy now, pay later because they don't understand how it works
- 6% have never heard of buy now, pay later, down from 10.29% in 2021.
- 11% have another reason
Will Affirm's debit card that offers buy now, pay later sway the 44% who say they just pay with cash or a debit card? We'll have to see.
33% of buy now, pay later users have made a late payment or incurred a late fee
Like credit cards, failing to make BNPL payments on time results in late fees. Among our respondents, 33% say they've made a late payment on a BNPL agreement or incurred a late fee. Consumers aged 18 to 24 are the most likely to land in this boat, with 48% being late and/or getting slapped with a fee.
Mistakes happen, so it's not shocking to learn that almost a third of BNPL users have been late with a payment.
What is troubling, however, is that 17% of consumers say they're "very likely" to be late with a BNPL payment over the next 12 months, and 18% say they're "likely" to be late within the year. That means 35% of buy now, pay later users think there's a chance they'll make a late payment within the next year -- a late payment that may have more consequences than people realize, as we'll see momentarily.
Only 32% of consumers say they're very unlikely to be late, while 14% say they're somewhat unlikely to be late.
Consumers aged 54 and older are less likely to be late with a BNPL payment than any other age group, with 63% of these buy now, pay later users saying they're "somewhat" or "very" unlikely to make a late payment in the next year.
Respondents aged 25 to 34 were the most likely to say they'd probably make a late payment within the next year -- 45% said they were "somewhat" or "very" likely to make a late payment in the coming 12 months.
Respondents over 55 were least likely to predict making a late payment in the next year, with just 16% thinking they’d do so.
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||$1.50 for every $50 in unpaid balance*||Up to $38 (per payment)|
|Klarna||0%||Up to $7 (per payment)|
|PayPal Credit||24.74% variable rate||Up to $41 (per payment)|
|Pay In 4||0%||None|
|Zip||0%||Up to $7 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%||15.78%|
|Typical late fee||$20 to $30 per payment||$28 for first late payment, $39 for subsequent late payments (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.
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, 27.42% of consumers agree that BNPL services could eventually take the place of their credit cards and would like for that to happen.
Meanwhile, 34.95% say BNPL services could replace their credit cards in theory, but they'll probably keep using their cards anyway. And 37.63% say BNPL services can't replace their credit cards.
Interestingly, at this point, among those who use a BNPL service, 48% do so more often than they use credit cards.
Younger Americans are more likely to use BNPL over their credit cards. Fifty-four percent of Americans aged 18 to 24 use BNPL more often than their credit cards, as do 53% of Americans aged 25 to 34. Just 40% of respondents over 54 years old use BNPL services more often than 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.
Over 40% of buy now, pay later users have used PayPal's BNPL services
We asked all of the respondents who had used buy now, pay later which services they had used. Here are the percentages that have used each of the following services:
45% of buy now, pay later users use it to make purchases that don't fit in their budget
BNPL services give consumers more flexibility in how they pay for purchases and help manage cash flow. But people use these services for many reasons.
We asked our survey respondents why they use buy now, pay later, and here's what they had to say:
|Reason for using BNPL service||Percentage of respondents who use BNPL for this reason|
|To make purchases that otherwise wouldn't fit in my budget||45%|
|I want to avoid paying credit card interest||37%|
|To borrow money without a credit check||21%|
|I feel like my personal data and information are safer||20%|
|I can't get approved for a credit card||14%|
|I don't like to use credit cards||13%|
|My credit card(s) are maxed out||13%|
|I don't have bank accounts||5%|
The fact that 45% of people use BNPL services to buy things that don't fit into their budgets is a bit worrisome. As is the 13% of people using buy now, pay later because their credit cards are maxed out.
Using buy now, pay later responsibly can be a useful way to bridge the gap between paychecks or keep credit card debt low. But not fully understanding how these services work can make this form of debt dangerous -- we'll discuss that below.
Interestingly, only 70% of our respondents agreed that buy now, pay later is a form of debt.
Electronics remain the most popular use of buy now, pay later
Because BNPL is becoming more widely available to consumers, they're able to use these services for a host of purchases. The most common ones include:
- Electronics: 47%
- Clothing and fashion items: 43%
- Furniture or appliances: 31%
- Personal care items or cosmetics: 28%
- Household essentials: 27%
- Groceries: 24%
- Books, movies, music, or games: 22%
- Fitness equipment: 15%
- Other: 8%
Based on this, it's pretty clear that buy now, pay later services aren't just for leisure spending. Rather, they play a big role in helping consumers cover their basic expenses -- things like food and household items.
That's a better use of BNPL than buying the latest iPhone or new clothes. While these are sometimes indeed necessary, it's a much better idea to save up for unnecessary purchases and pay for them in cash instead of incurring debt.
36% 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||Percentage of BNPL users, July 2020||Percentage of BNPL users, March 2021||Percentage of BNPL users, June 2022|
|Once a year or less||28%||25%||22%|
|Once every six months||21%||19%||17%|
|Once every three months||21%||19%||23%|
|Once a month||18%||18%||19%|
|Once a week||8%||9%||12%|
|More than once a week||4%||9%||7%|
Americans between 35 and 44 years of age are most likely to use BNPL more than once a week. Those over 54 are most likely to use BNPL once a year or less.
Roughly twice as many male consumers use a BNPL service more than once a week compared to female consumers (9% versus 5%).
Most buy now, pay later users have a single payment per month
Since only about one-third of consumers use BNPL services once a month or more frequently, most aren't juggling an unhealthy number of monthly payments. But still, 8.39% of consumers say they make five or more BNPL payments in an average month.
By contrast, 23% of buy now, pay later users make zero payments in an average month, 19% make one, and 23% make 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%|
Consumers aged 18 to 24 are the most likely to be grappling with monthly payments over $250 -- 38% of our respondents 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 Americans don't feel that they understand the terms and conditions of buy now, pay later programs:
- 7% give themselves a 1 (they don't understand BNPL at all)
- 7% give themselves a 2
- 20% give themselves a 3
- 28% give themselves a 4
- 37% give 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%).
We're very happy to see that people have a better grasp of how buy now, pay later works in 2022 – though we'd love to see a 0% in the "I don't understand it at all" column.
30% of buy now, pay later users trust BNPL providers more than credit card companies when it comes to fair business practices
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?
Among users of buy now, pay later services, there was a fairly even split when it came to trusting buy now, pay later services and credit card companies with personal data (29% versus 22%).
48% of respondents said that 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
31% 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?
After a near 50% increase between 2020 and 2021 in the number of survey respondents who had used a buy now, pay later service, usage declined by 5% the following year. Despite the decline, BNPL seems to have solidified as a payment option for many Americans – 50% say they’ve used it.
With 16% of non-users saying they’re likely to use BNPL within the next year there’s still an opportunity for growth in the industry, albeit at a slower pace than last year, when over half of non-users said they’d be likely to use BNPL in the next year.
Some paths to growth in the BNPL industry may rely on convincing consumers to use BNPL over their credit cards. Other opportunities may come as additional merchants across industries offer BNPL options to customers.
Those prospects rest on a series of questions we’ve sought to answer: Will we see buy now, pay later start to replace people's credit cards? Will the difference in trust between credit card companies and BNPL providers increase? Will common purchases start to include things like groceries, personal care items, and other things outside of electronics and fashion?
This field is changing fast -- so we'll be sure to keep an eye on it and report back.
The Ascent, a Motley Fool service, surveyed 2001 American adults on June 29, 2022. The respondents were 42.73% male and 57.27% female.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.