Buy Now, Pay Later programs are payment methods that allow consumers to pay back a purchase through a short-term loan. Usually, a 25% down payment is paid then followed up with three equal-sized payments across six weeks. There are some alternative BNPL programs, like ones that feature shorter time frames or more frequent payments.
Most BNPL programs do not include interest rates, which sets it apart from traditional loan programs. With fluctuating gas prices and interest rates, BNPL programs are becoming increasingly popular among Americans who want a transparent, consistent payment option.
According to The Federal Reserve Bank of Richmond, BNPL programs share characteristics with Layaway programs of the 20th century, where consumers would reserve products and pay off portions of the price until they were finally able to own it. As such, the core concepts of BNPL have been around for a long time. So what contributes to the sudden growth of these programs in the years since the pandemic?
During the pandemic, BNPL loans grew from $2 billion to $24.2 billion — a ten-fold increase according to the Richmond Fed. This was the beginning of popularity for BNPL payments, and it occurred because consumers were looking forward to indulging on items amidst the economy of the pandemic. A large concentration of these loans were directed at apparel and beauty, while few were focused on everyday necessities.
BNPL programs have remained popular throughout the years because of its deviation from the strict, traditional credit system. BNPL programs do not require input of credit history, salary, or age and failure to repay loans does not impact the consumer’s credit score. The approval process is also extremely easy, meaning virtually anyone can pay using BNPL immediately. As such, the Richmond Fed claims that BNPL programs are especially useful to those with low credit scores.
Buy Now, Pay Later (BNPL) programs have become popular as a result of Americans maxing out their credit cards. According to CNBC, as the credit card debt in the US hits $.125 trillion, 44% of Americans plan to take out a BNPL loan. BNPL programs are now being used to cover everyday expenses as credit cards cease to be enough. In fact, 29% of BNPL programs are used to cover groceries in 2026, in comparison to 14% just two years earlier. This increase reflects the growing demand for BNPL as an alternative to cover everyday costs, showing how credit cards no longer suffice for American’s everyday spending.
However, BNPL programs are not any less stressful than credit card payments. In fact, 47% of BNPL users have been late on at least one payment in the last 12 months. Being late on a BNPL is a slippery slope that can turn a small payment into an onerous liability, according to CNBC. Each day late adds between $7 to $8 to the total payment.
As BNPL programs become widespread, there remains policy issues to be addressed. Overextension of loans, inconsistent protection of consumers, and extraction of consumer data are among the most concerning. As financial organizations work to address the issues caused by the massive rise of of BNPL programs, it is important to understand the implications of each BNPL program and make informed decisions.
