Has ‘Buy Now, Pay Later’ Backfired? One-Third of US Consumers Fall Behind on Payments
Many retailers have partnered with buy now, pay later service providers to make it easier for customers to make purchases. Similar to credit cards, BNPL services allow you to buy something today and then pay for it over time in installments.
Although the consumer fad has been growing in popularity in the U.S, a third of consumers who have used these services have now fallen behind on one or more payments, a new study published by personal finance company Credit Karma showed. Meanwhile, 72% of those said their credit score declined. Over 40% of survey respondents also said they had used BNPL services before.
The survey also found that younger consumers were more likely to miss payments, as more than half of Gen Z and millennial respondents revealed they had missed at least one payment. Younger generations were also more likely to make low-cost purchases of $500 or less. Nearly half of Gen Z respondents also said they used BNPL services for expenses of $100 or less.
Reuters noted that BNPL providers such as Klarna, Affirm, Afterpay and Paypal have seen a boom in volumes as a result of online shopping growth during the pandemic. Klarna even announced last month that it has doubled its U.S. customer base since June 2020, reaching a record 20 million customers.
Explosive growth has also led to more scrutiny from regulators, added Reuters, who aim to ensure consumers aren’t taking on more debt than they can handle.
“It’s easier than ever to purchase an item — and finance it — without even thinking about the implications of the purchase,” Colleen McCreary, financial advocate at Credit Karma, told Reuters. “It’s this disconnect between making a purchase and actually paying for it where consumers can get in trouble.”
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Last updated: September 10, 2021