Americans Spend Over $160 Billion on Buy Now, Pay Later Plans

Americans spent more than $160 billion last year using buy now, pay later (BNPL) plans, according to research by Federal Reserve economists. These plans, initially popular for large purchases, are increasingly being used for everyday expenses like groceries, bills, and even rent. The most common type, pay-in-four plans, accounted for about half of this spending, with usage up nearly 80% since 2023.

Financial experts caution consumers to read the fine print and understand how missed payments could impact their credit scores. Sara Rathner, a credit card expert at NerdWallet, warns that while BNPL can be beneficial, it can also lead to financial stress if not managed carefully.

The BNPL market has grown rapidly since the pandemic, but its impact on financial stability remains limited. A report from the Federal Reserve Bank of Richmond indicates that while BNPL is a growing component of consumer credit, it still represents a small share of total U.S. credit card spending.

Despite its growth, BNPL has maintained relatively low default rates compared to other credit products. However, experts like Ed deHaan from Stanford Graduate School of Business advise caution, noting that some BNPL products may charge hefty fees for missed payments.

Consumers are encouraged to consider their ability to repay BNPL loans and to avoid stacking multiple plans, which can quickly become unmanageable. Additionally, exploring other resources such as food banks or hardship programs may help alleviate financial strain.