Buy now, pay later (BNPL) services offer short-term installment loans that allow consumers to finance their purchases over a set period of time, interest-free.

According to a report by the Consumer Financial Protection Bureau (CFPB), between 2019 and 2021, the number of BNPL loans originated in the U.S. by the top five lenders grew by 970 percent. Not only that, but the dollar volume of BNPL loans grew by over 1,000 during that same period, going from $2 billion to $24.2 billion.

But despite BNPL’s increasing popularity, not everyone is on board with this new lending concept. A recent survey found that two-thirds of consumers view them as “financially risky”. This is likely due to the fact that they can cause consumers to overspend, driving them into a cycle of debt.

Bankrate insight

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

Buy now pay later statistics

Credit Card
  • As of 2021, 60% of consumers have reported using a BNPL service.
  • Out of those consumers, 46% are still making payments.
  • The average debt owed by consumers using a BNPL service is $883.
  • The average BNPL user finances about four items at a time.
  • Clothing, electronics and furniture were the top three items financed using BNPL services during the COVID-19 pandemic, accounting for 47%, 44% and 32% of all financed purchases, respectively.
  • 56% of consumers who have used BNPL services say they prefer them to credit cards mainly because they’re easier to pay and offer more flexibility.
  • 38% of BNPL users say that these services will eventually replace their credit cards.
  • 57% of BNPL consumers reported regretting their purchase because “it was too expensive.”
  • More than half of surveyed BNPL users have reported falling behind on payments.
  • It is estimated that by 2027, consumer spending using BNPL services will reach $437 billion globally — a 290% increase from 2022.

Buy now, pay later apps

According to a study by C+R Research, there are about a dozen BNPL platforms in the United States alone. The table below shows the most popular platforms among consumers.

Platform Percentage of consumers who use it
Source: C+R Research
PayPal Credit 57%
Afterpay 29%
Affirm 28%
Klarna 23%
Zip (Zip Pay) 19%

Here’s a closer look at what each of these platforms have to offer:

  • PayPal Credit. PayPal’s BNPL platform allows you to split purchases in four, interest-free payments. The service features autopay, purchase protection and no sign-up or late payment fees. Consumers can finance purchases between $30 to $1,500 and payments are due on a bi-weekly basis. On the downside, this service isn’t available in every state.
  • Afterpay. Afterpay’s BNPL can be used both online and in-person at select stores. The company allows customers to split their purchase into four, interest-free installments, which are completed over the course of six weeks. The company does assess a late payment fee of up to 25 percent of the purchase price. However, it offers many perks, like store discounts through its app and rewards.
  • Affirm. Affirm doesn’t charge consumers any annual or late payment fees, and its 4-installment loan doesn’t have any maximum credit limit. The amount you qualify for is based on your credit. The company’s services can be used both online and in-person at thousands of retailers nationwide.
  • Klarna. Just like the other BNPL apps on this list, consumers get four, interest-free payments and your purchasing power is determined by your credit. Klarna is available to use online and in-person at any retail of your choice. The company’s app also features a price comparison tool, to help consumers save money and earn rewards for every dollar spent.
  • Zip (Zip Pay). Zip is a global BNPL service used by over 94,000 merchants worldwide. Consumers can split their payments into four, interest-free installments, which are repaid over six weeks. Zip offers rewards and discounts at select retailers, however, unlike other BNPL services, the company does charge a $6 installment fee and a $5 late fee.

Buy now, pay later use by age

Age Percentage of BNPL users
Source: Federal Reserve
18-35 41.6%
36-55 31.6%
56+ 26.8%

As the table above shows, Gen Z and Millennials are 55 percent more likely than other generations to use BNPL services to finance their purchases.

Buy now, pay later use by household income

Household income Percentage of BNPL users
Source: Federal Reserve
Less than $75,000 72.6%
$75,000 and over 17.6%

According to data by the Federal Reserve, consumers with a household income of less than $75,000 are four times more likely to use BNPL services than those with a household income above that threshold.

Top reasons people use BNPL

Easier payments, greater flexibility and saving on interest were among the top three reasons consumers chose to use a BNPL to finance their purchase in 2021.

Reasons for using a BNPL Percentage of people who use it for this reason
Source: C+R Research
Easier to make payments 45%
More flexibility 44%
Lower interest rates 36%
Easy approval process 33%
Credit cards are maxed out 33%
No interest 22%
Low credit card limit 22%

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.