Buy now, pay later (BNPL) services have become increasingly popular over the past several years. These services allow customers to make interest-free installment payments on a purchase over a set amount of time, usually a few weeks.

According to a recent survey, 60 percent of respondents have used a buy now, pay later service over the course of the COVID 19 pandemic. At the same time, 66 percent of respondents said that they consider using buy now, pay later services to be “financially risky”. This is likely due to the fact that buy now, pay later services can cause people to spend more than they have. Buy now, pay later services can create the illusion that items are less expensive than they are. If consumers get carried away, they could end up with more debt than they can afford.

What is buy now, pay later?

Buy Now, Pay Later (BNPL) is a short-term financing method that allows borrowers to make purchases and pay for them in a number of interest-free installments. BNPL is also known as a point of sale installment loan.

This method of financing has become increasingly popular, especially in the realm of online shopping. These plans are easy to get approved for and typically do not charge interest or impact your credit score. However, if you fail to make payments, your credit score could take a hit.

If you want to purchase an item with BNPL financing, make sure you are purchasing from a retailer that works with BNPL lenders. If you are making an online purchase, you can get approved for an installment plan at checkout. You will make a downpayment at checkout, typically around 25 percent of the overall cost, and the rest will be paid in installments.

While BNPL can be used for a variety of purchases, some of the most common purchases with BNPL include clothing, electronics, furniture and appliances. Buying electronics is the most common use of BNPL, with 48 percent of consumers saying they’ve used it for that purpose.

Over 50 percent of consumers have used BNPL over the course of the pandemic, with 59 percent reporting that they made an unnecessary purchase that they otherwise could not have afforded. The number of people who understand what BNPL is has also increased, with a 50 percent increase between 2020 and 2021.

Key statistics for BNPL

The number of BNPL users is projected to hit 59.3 million in 2022. The number of BNPL users has been increasing substantially over the years, due in part to COVID-related financial strife, but also driven by the increased prevalence of BNPL companies.

This financing option is flexible and easy to qualify for. For instance, 45 percent of consumers say they chose BNPL because it was easier to make payments than a credit card, and 44 percent said they chose it because it provides more flexibility.

Here is a breakdown of some key BNPL statistics.

Average BNPL use by age

Age Percentage who have used BNPL
18-24 61%
25-34 60%
35-44 61%
45-54 53%
54+ 41%

Average household income vs. % of people who have used BNPL

Average household income Percent of people who have used BNPL
>$35,000 39%
$35,000-$49,999 47%
$50,000-$74,999 50%
$75,000-$99,999 43%
>$100,000 41%

BNPL financing is most common among people who are aged 18-24 and 35-44. Generally, younger age brackets tend to use BNPL more often. The income demographic most likely to use BNPL is $50,000-$74,999. Consumers above and below this bracket use BNP at a similar rate.

Top reasons people use BNPL

Reasons for using BNPL Percentage of people who use it for this reason
Purchase that is out of budget 44.98%
Avoid CC interest 36.92%
Borrow Money W/O credit check 24.73%
Avoid sharing personal data 20.79%
Alternative to a credit card 19.18%
Maxed out credit card 17.2%
Can’t get approved for a credit card 14.16%
No bank account 7.71%
Other 5.73%

Overall, the most common use of a BNPL plan is buying clothes and electronics. The most common reason for using a BNPL plan is purchasing an item that is out of the consumer’s budget.

Usage rates and trends

BNPL usage increased significantly between 2020 and 2021, and data suggests that these trends are continuing upward in 2022. This trend could be due to rising inflation in addition to the increased prevalence of BNPL companies in the lending space. It seems that younger demographics are most likely to use BNPL, particularly consumers between the ages of 18 and 24.

Average amount people owe with BNPL

Amount owed Percentage of users
Less than 100 28%
101-250 18%
251-500 25%
501-1,000 17%
1,001-,2500 9%
2,501-5,000 2%
More than 5,000 1%

BNPL from a company perspective

BNPL is convenient for consumers, but it also benefits the companies offering this financing method.

BNPL companies partner with merchants to bring the service to consumers. The BNPL companies charge the merchants a fee, then pay the full price of the purchased item on behalf of the participating consumer.

BNPL companies also make money through late fees, interchange fees and cost-per-click advertising. BNPL also benefits participating merchants since consumers are more likely to make larger purchases when they use BNPL. The BNPL industry made $120 billion in 2021.

The bottom line

BNPL is a quick and convenient option if you need to buy something and don’t have the money right away. However, it is easy to get carried away with BNPL. Make sure you are only using it for things that you know you can afford. If you want to go a different route, you could consider a credit card or an installment loan, though these products are unlikely to have the same no-interest terms that make BNPL so appealing.

If you decide to go with BNPL financing, keep track of your payments. If you forget to make the payments or are unable to afford them, you run the risk of incurring a late fee and hurting your credit. It is also important that you only use BNPL for items you are unlikely to return. You may still have to make payments even if you return an item.

BNPL has become an increasingly popular financing method that benefits retailers, consumers and the companies that offer this financing option. While there are many pros to BNPL, it can cause consumers to fall into debt and buy things they do not need and otherwise would not have purchased. Always think things through before using a BNPL plan.