Americans are increasingly relying on “Buy Now, Pay Later” loans for basic necessities like groceries, signaling a troubling shift in consumer financial health as delinquency rates rise.
At a Glance
- 25% of Buy Now, Pay Later (BNPL) users are now financing grocery purchases, up from 14% in 2024
- 41% of BNPL users have made late payments in the past year, increasing from 34% previously
- Klarna’s consumer credit losses rose 17% year-over-year to $136 million in the first quarter
- 60% of BNPL users have multiple loans simultaneously, with nearly a quarter juggling three or more
- The Consumer Financial Protection Bureau has decided against enforcing stricter regulations on BNPL services
From Luxury Items to Groceries: The Changing Face of BNPL
Buy Now, Pay Later services were originally designed for discretionary purchases like electronics and designer goods. Today, these payment plans are increasingly being used for basic necessities, revealing deeper economic struggles among American consumers. The percentage of BNPL users financing grocery purchases has jumped to 25%, a significant increase from 14% in 2024 and 21% in 2023. This shift coincides with persistent inflation, high interest rates, and growing economic uncertainty that has left many Americans stretching their budgets to cover essential expenses.
“It’s pretty clear that as people struggle with inflation and other kinds of economic uncertainty, people are looking to things like BNPL loans to help them extend their budget,” notes Matt Schulz of LendingTree. “When buy now, pay later started, it was typically about designer handbags and appliances and things like that. But now, people are looking at it for things like groceries and food delivery.”
Rising Delinquencies Signal Financial Distress
Alarming trends in payment delinquencies indicate growing financial strain among BNPL users. According to recent data, 41% of respondents reported making an overdue payment on a BNPL loan in the past year, up from 34% the previous year. LendingTree’s research shows an even more concerning pattern, with 40% of BNPL users making late payments, an increase from 33% last year. These statistics suggest that consumers are increasingly unable to manage even relatively small installment payments, pointing to deeper financial troubles.
The delinquency problem extends to major BNPL providers like Klarna, which reported that consumer credit losses rose 17% year-over-year to $136 million in the first quarter. The percentage of Klarna’s unpaid loans increased from 0.51% in 2024 to 0.54% this year. While this might seem like a small percentage, it represents millions of dollars in losses and thousands of consumers falling behind on payments during a time of supposed economic recovery.
Multiple Loans Create Debt Spirals
One of the most troubling aspects of the BNPL phenomenon is the tendency for users to accumulate multiple loans simultaneously. Research indicates that 60% of BNPL users have multiple loans active at once, with nearly a quarter managing three or more concurrent payment plans. This pattern creates a dangerous debt cycle, as consumers struggle to keep track of multiple payment schedules and often find themselves facing steep late fees when they miss deadlines. The structure of BNPL loans, with minimal credit checks and easy approval processes, enables this accumulation of debt.
“I don’t think there’s any reason to believe that this is going to do anything but increase,” warns Matt Schulz.
The six largest BNPL providers originated a staggering 277.3 million loans totaling $33.8 billion in 2022 alone. This volume has likely increased since then, with more consumers turning to these services during economic uncertainty. The Federal Reserve has expressed concerns that BNPL services may encourage overspending and lead to increased overdraft and credit card fees as consumers struggle to manage their finances across multiple platforms and payment types.
Regulatory Gaps Leave Consumers Vulnerable
Despite the mounting evidence of consumer harm, regulatory oversight of BNPL services remains limited. The Consumer Financial Protection Bureau (CFPB) recently decided not to enforce a Biden-era regulation that would have treated BNPL loans like credit cards, providing users with greater protections. Consumer advocates warn that this lack of federal oversight reduces legal recourse for BNPL users who encounter problems with these services. Critics argue that the CFPB’s approach prioritizes financial technology innovation over consumer protection.
The demographic profile of BNPL users adds another layer of concern to this regulatory gap. These services are particularly popular among younger consumers, with Black and Hispanic women more likely to use these plans than other demographic groups. Without adequate consumer protections, financially vulnerable populations may find themselves accumulating debts they cannot repay, potentially exacerbating existing economic disparities in American society.