Buy now, pay later usage increasing, delinquencies rise

Consumers are using buy now, pay later (BNPL) services to cover daily expenses, according to a survey by CouponBirds. Usage is expected to rise in the back half of this year as Trump administration tariffs are expected to raise prices.

The survey data found that 68% of respondents expect to use BNPL more often if prices continue to rise. Additionally, 52% of consumers have utilized flexible financing options in the past, with 66% of Gen Z (shoppers under 28 years old) leading the way.

The survey asks respondents at what rate they are turning to BNPL to cover expenses as opposed to purchasing goods. For younger Americans, many of whom face high-deductible health plans and rising out-of-pocket costs, BNPL has become an increasingly common solution for managing medical expenses. Survey data found 51% of Gen Z and 24% of Millennials (ages 29 to 44) have used BNPL to make medical expenses more affordable.

Also, 24% of the survey respondents said they have used deferred financing for services like rent, mortgage payments and utilities. Among younger consumers, that rate of usage jumps to 32%. The survey also found that over the past year 51% of Gen Z users have missed at least one payment, significantly higher than the 41% of Millennials and one in three Gen X (ages 45 to 60).

Among Gen Z users who paid late, 38% report multiple missed payments, while those earning under $50,000 annually are nearly twice as likely to miss payments as their higher-earning counterparts.

Among all buy now, pay later users, 66% report being “very confident” in their ability to make payments, while 27% said they are “somewhat confident” and 5% are not very confident.

“Whether buy now, pay later represents a genuine innovation in consumer finance or a warning sign of deeper economic struggles could depend largely on how providers balance growth with responsible lending practices, particularly as they expand into essential goods and services,” noted the CouponBirds report.

Gen Z and Millennials face student loan debt averaging $38,000 per person. They also have rising housing costs that average 47% of the disposable income in major cities, noted Frankie Zhu, chief operating office at CouponBirds.  He said rising housing costs have pushed more young consumers toward BNPL for basic living expenses. The survey also found that BNPL serves as a bridge between irregular gig economy income and fixed housing expenses.

Zhu said higher costs apply to paying later, as deferred financing rates can run as high as 36.99%. For instance, tickets to a music festival that cost $640 can be relatively affordable with shorter term rates of 9.99% over three months. But for those who chose the longer payment option, the same $640 tickets financed over 36 months at 36.99% adds $428.35 in interest charges which takes the total cost to $1,068.  Even at 19.99% interest the cost over three years is $856.

The impact can be more stark when using BNPL with daily purchases like at $39 dinner at Chipotle. Over a three-month term at 9.99% the interest cost is less than $1. But if that meal is financed over time on a high-interest credit card at over 30%, the carrying cost over 36 months is 60% more expensive than the cash price.

Zhu said BNPL can be an effective way to spread out costs for larger purchases. But users need to seek shorter terms at lower interest rates to avoid the traps of lower payments over longer terms, which equal significantly higher costs.

The study notes that as retailers and service providers like DoorDash offer deferred payment options, consumers can more easily stretch their finances thin when they have multiple payments deducted and are spending income before it’s earned.

LendingTree surveyed BNPL users in June and reported 41% of users admitted paying late within the past year, which was up from 34% in the prior year. That survey also found 25% of users took out our loans to pay for groceries, which was up from 14% in 2024.

Klarna reported rising delinquencies through the first half of this year among more users. Klarna CEO Sebastian Siemiatkowski said in May that the payment solution provider had reached 100 million consumers and secured exclusive partnerships with major retailers like Walmart through OnePay, and an expanded partnership with eBay in the U.S.