You’ve probably seen jokes about splitting a burrito into four payments. The punchline may sound harmless, but the trend points to a serious change in consumer borrowing. Buy now, pay later (BNPL) products have become a routine checkout option for clothing, electronics, groceries, food delivery, and other everyday purchases.
BNPL can be useful when payments are planned and affordable. But it is still credit. When several small payment plans overlap, a convenient checkout feature can turn into a difficult-to-track web of due dates, fees, overdrafts, and financial stress.
The Buy Now, Pay Later Explosion
Installment credit is not new, but digital BNPL products have made borrowing faster and more deeply integrated into online shopping. In the Federal Reserve’s 2025 household survey, 16% of U.S. adults said they had used BNPL during the prior 12 months, up from 10% when the survey first asked about it in 2021.1
The products are no longer limited to expensive purchases. Consumers may encounter pay-over-time options for restaurant delivery, groceries, apparel, electronics, furniture, appliances, and relatively inexpensive household products. That expansion matters because repeated small loans can be harder to notice in a budget than one large balance.
Retailers have a strong incentive to offer BNPL. Affirm has promoted merchant case studies and platform data showing that pay-over-time options can lift conversion, average order value, and revenue. One published Affirm example reported up to a 14% revenue lift, while another cited a 21% conversion increase for purchases above $250. Those are merchant-performance claims, not guarantees for every retailer, but they help explain why BNPL buttons appear so often at checkout.2
Who’s Using Buy Now, Pay Later?
BNPL use is especially common among younger and lower-income consumers. Federal Reserve data show higher usage among adults under 60 and among households earning less than $100,000. In the 2025 survey, 23% of adults with family income between $25,000 and $49,999 reported using BNPL, compared with 12% of adults earning $100,000 or more.1
The same data show that financial necessity is a major reason people use these products. Fifty-nine percent of BNPL users said the service was the only way they could afford the purchase, while 87% said they wanted to spread out payments.1
Common BNPL purchase categories include:
- Clothing, shoes, and accessories
- Electronics and technology
- Furniture and home goods
- Appliances
- Groceries and other household essentials
A 2026 LendingTree survey found that 29% of BNPL users had used the loans for groceries, up from 14% two years earlier. Clothing and technology remained more common categories, but the growth in grocery financing suggests that BNPL is increasingly being used to manage basic expenses, not just discretionary shopping.3
The Darker Reality Behind the Convenience
It is easy to frame BNPL as a problem caused only by impulsive shopping. The evidence is more complicated. Many users are trying to smooth irregular cash flow or cover purchases they otherwise could not afford. That does not make the debt safer; it means the underlying financial pressure may already be severe.
The Consumer Financial Protection Bureau found that more than three-fifths of BNPL borrowers in its matched 2022 data held multiple simultaneous BNPL loans at some point during the year. One-third borrowed from multiple providers. BNPL borrowers were also more likely to carry higher balances on other unsecured credit accounts.4
When loans are spread among several apps, no single account screen necessarily shows the borrower’s full obligation. A $15 installment here and a $30 installment there can feel manageable until several payments hit the same checking account within a few days.
The Debt Trap Begins to Close
Repayment problems are significant, although estimates vary depending on the survey and the population studied. The Federal Reserve’s nationally representative 2025 household survey found that 26% of BNPL users had paid late during the prior year. Among users with income below $25,000, the late-payment rate was 40%.1
A separate 2026 LendingTree survey reported a higher figure: 47% of BNPL users said they had paid late in the past year. LendingTree also found that 68% believed BNPL caused them to overspend, and 54% had regretted a BNPL purchase. Because the studies use different samples and methods, the figures should not be treated as directly interchangeable. Together, however, they show that missed payments and financial strain are not rare.3
Late payments may create more than one cost. In the Federal Reserve survey, 64% of users who paid late said they were charged extra. Eleven percent of all BNPL users reported that a BNPL payment triggered an overdraft or nonsufficient-funds fee from their bank.1
The True Cost of “Zero Interest”
Many pay-in-four plans charge no interest when payments are made on schedule. Other BNPL products are longer-term installment loans that may carry annual percentage rates as high as 36%, depending on the provider, borrower, purchase, and state law. Consumers should read the specific loan disclosure instead of assuming every BNPL option is free.5
Even an interest-free plan can become expensive when a missed payment causes a late fee or when an automatic withdrawal triggers a bank fee. Some providers cap or restrict late fees, and policies can change, so examples should always be checked against the current terms shown at checkout.
The main risk is not one isolated fee. It is the cumulative effect of multiple obligations competing for the same paycheck. A consumer may be current on each account today but still be vulnerable if work hours are reduced, an emergency occurs, or several automatic payments arrive together.
Could BNPL Affect Your Credit?
Credit-reporting practices are evolving. The CFPB has noted that BNPL loans historically were not reported to nationwide consumer reporting companies in enough volume for outside observers to measure the market fully. Some providers and credit bureaus have since introduced reporting arrangements for certain products, but treatment can vary.4
A missed payment may still harm a consumer even when the original loan is not routinely reported. An account that is charged off or sent to collections can potentially appear on a credit report, and an overdraft can create separate banking problems. Consumers should check the provider’s current reporting and collections policies before borrowing.
Even the Companies Face Credit Risk
BNPL providers also absorb losses when customers do not repay. Klarna reported a $99 million net loss for the first quarter of 2025, compared with a $47 million loss a year earlier. Customer credit losses rose 17% year over year to $136 million. It would be inaccurate to say that defaults alone caused the entire net loss, because company earnings also reflect operating expenses, funding costs, restructuring, and other factors. Still, the increase in credit losses demonstrates that repayment risk is meaningful for the providers as well as consumers.6
The Broader Economic Implications
BNPL debt is difficult to measure because much of it has historically remained outside traditional credit reports. That creates a visibility problem for borrowers, lenders, regulators, and economists. A consumer may appear to have a manageable credit profile while owing several short-term installments that are scheduled to draw from a bank account.
It would be too strong to claim that BNPL defaults alone are likely to cause a recession. The better-supported concern is that rapid growth, loan stacking, and limited reporting can obscure household financial stress. If many consumers must divert future income to earlier purchases, they have less room for emergencies and new spending.
Regulation Is Catching Up
Governments are bringing BNPL closer to the regulatory frameworks used for other forms of consumer credit.
In Australia, BNPL contracts became subject to the National Credit Code on June 10, 2025. Providers engaging in covered credit activities generally must hold an Australian credit license, and the reforms introduced responsible-lending obligations for the sector.7
In the United Kingdom, Financial Conduct Authority regulation of qualifying deferred-payment credit began on July 15, 2026. The new protections include clearer precontract information, proportionate affordability checks, support for customers in financial difficulty, and access to the Financial Ombudsman Service.8
In the United States, oversight remains more fragmented and continues to evolve. Consumers should not assume that every pay-in-four transaction carries the same protections as a conventional credit card, particularly for disputes, refunds, disclosures, and credit reporting.
Can You Still Use Buy Now, Pay Later Safely?
BNPL can be manageable when the purchase is planned, the repayment money is already available, and the user tracks every due date. The safest approach is to treat it as a real loan rather than a harmless checkout feature.
Do:
- Treat every BNPL plan as debt with real consequences.
- Confirm that the full purchase fits your current budget.
- Review the APR, fee, autopay, refund, and credit-reporting terms.
- Keep a written list of every active plan and due date.
- Leave enough money in the linked account to avoid bank fees.
- Limit the number of simultaneous plans.
Don’t:
- Assume every BNPL product is interest-free.
- Use several providers without tracking the combined payment total.
- Rely on future income that is uncertain.
- Ignore payments while a return or refund is being processed.
- Let a small installment amount disguise the full purchase price.
If You’re Already in Trouble
If BNPL payments are becoming difficult to manage, acting early can reduce the damage:
- List every balance. Record the provider, remaining balance, next payment, linked account, fees, and APR.
- Protect essentials. Make sure housing, utilities, food, transportation, insurance, and other necessities are covered first.
- Stop opening new plans. Adding another installment loan may temporarily free cash but usually increases future pressure.
- Contact the provider. Ask about due-date changes, hardship options, fee waivers, or a modified payment arrangement before the account defaults.
- Watch automatic withdrawals. Avoid accidental overdrafts, but understand that canceling autopay does not cancel the debt.
- Consider nonprofit credit counseling. A reputable counselor can help review the full budget and prioritize debts.
The Bottom Line
Buy now, pay later services are not free money. They are credit products designed to make a purchase feel smaller by separating the price from the immediate payment. For disciplined users, that structure may be convenient. For consumers already living close to the edge, it can conceal how much future income has already been committed.
The rise of BNPL for groceries and other necessities is not just a joke about financing a burrito. It is a sign that many households are using short-term debt to bridge ordinary expenses. The most important question at checkout is not whether the first installment is affordable. It is whether the entire purchase, together with every other obligation, fits safely within the budget.
Before selecting a BNPL option, pause and calculate the total amount owed, the dates the money will leave your account, and the consequences if your income changes. Your future financial health depends less on how small today’s payment looks and more on whether tomorrow’s payments are truly affordable.
References:
1. Report on the Economic Well-Being of U.S. Households in 2025: Credit │ Federal Reserve
2. How Pay Later Is Powering Small Business Growth │ Affirm
3. BNPL Tracker: 47% of Users Late in Past Year│LendingTree
4. Consumer Use of Buy Now, Pay Later and Other Unsecured Debt │ Consumer Financial Protection Bureau
5. How to Use Affirm for Flexible Buy Now, Pay Later Payment Plans │ Affirm
6. Klarna’s Losses Widen After More Consumers Fail to Repay Loans │ Financial Times
7. Buy Now Pay Later Credit Contracts: Credit Licensing │ ASIC
8. Buy Now Pay Later │ Financial Conduct Authority
