KEY POINTS
- Rising BNPL usage: Fourteen percent of Americans used BNPL in 2023, up from 12% in 2022.
- Late payment rates: Eighteen percent of Americans using BNPL have made a late payment, with higher rates among younger and lower-income users.
- Trust and preference: Fifty-three percent of BNPL users prefer it over credit cards, and 62% trust BNPL providers more.
Over half of buy now, pay later (BNPL) users prefer BNPL to credit cards and trust BNPL providers more than traditional credit card companies.
That's according to The Motley Fool Ascent's 2024 Buy Now, Pay Later Trends Study, featuring a survey of 2,000 Americans and analysis of the latest data on BNPL usage by the Federal Reserve.
Read on for a look into the latest BNPL trends, including whether BNPL will cut into the credit card industry.
14% of Americans used BNPL in 2023
Fourteen percent of Americans used BNPL in 2023, up from 12% in 2022, according to the Federal Reserve.
Editor's note: The usage of buy now, pay later services among American adults shows considerable variation among survey results, indicating anywhere from 12% to more than 60% have used buy now, pay later.
Among respondents to The Motley Fool Ascent's 2024 Buy Now, Pay Later Trends Study, 49% had used BNPL at least once since BNPL became available. Fifteen percent of respondents reported using BNPL less than once a year.
Younger respondents to The Motley Fool Ascent's survey were more likely to report ever having used BNPL:
- 58% of Gen Z respondents used BNPL at least once since BNPL became available.
- 64% of millennial respondents used BNPL at least once since BNPL became available.
- 49% of Gen X respondents used BNPL at least once since BNPL became available.
- 28% of baby boomer respondents used BNPL at least once since BNPL became available.
18% of Americans who have used buy now, pay later have made a late payment
Eighteen percent of Americans who have used buy now, pay later have made a late payment, according to the Federal Reserve.
Lower-income Americans, younger Americans, and non-white Americans are more likely to have made a late payment, per the Federal Reserve.
That aligns with The Motley Fool Ascent's 2024 Buy Now, Pay Later Trends Survey, which found that 39% of BNPL users have made a late payment, and that younger respondents were more likely to have fallen behind at least once.
Editor's note: The percentage of Americans who have missed or made a late buy now, pay later payment shows considerable variation among surveys, with results ranging from 7% to 56% of BNPL users.
Understanding interest and late fees in buy now, pay later services
Most buy now, pay later services advertise 0% interest -- but that can be a bit misleading. If you make a late payment, you'll incur at least a late fee. And you may have to pay a finance fee, too.
Here are the interest rates and late fees based on BNPL services' terms and conditions:
| BNPL service | Interest rate | Late fees |
|---|---|---|
| Affirm | Up to 36% | None |
| Afterpay | 0% | For orders below $40, the late fee is capped at 25%. For orders $40 or above, an initial $10 late fee applies, with an additional $7 fee after seven days if unpaid. This continues until the 25% cap or $68 limit is reached. |
| FuturePay | $1.25 for every $50 in unpaid balance* | Up to $38 (per payment) |
| Klarna | 0% | Up to $7 (per payment) |
| PayPal Credit | 29.24% variable rate | Up to $41 (per payment) |
| Pay In 4 | 0% | None |
| Zip | 0% | Up to $10 per purchase |
| Sezzle | 0% | $10 per payment |
| Splitit | 0% | None (though your credit card will charge late fees) |
The promise of making purchases with no interest makes it seem like buy now, pay later is the clear winner over traditional credit. But is BNPL really better than a credit card?
The answer is complicated and largely depends on what consumers are looking for. For example, using a buy now, pay later service can't help your credit score, but it can hurt it.
Here are some factors that American consumers should take into account when deciding between the two:
| Buy now, pay later | Credit cards | |
|---|---|---|
| Average interest rate | 0% | 21.51% as of May 2024 |
| Typical late fee | $20 to $30 per payment | $8, according to CFPB |
| Typical repayment period | 6 weeks to 12 months | One month to repay without interest, up to 24 months with an introductory 0% APR card |
| Typical frequency of payments | Every two weeks to once a month | Once a month |
| Reports to credit bureaus | Late payments (reduces credit score) | On time and late payments (may improve or reduce credit score) |
| Credit checks | Not usually | Always |
Note that these are typical figures, and not set in stone, especially for buy now, pay later programs, which vary.
If consumers are looking to improve their credit score or have more flexibility in their repayment period, a credit card with a 0% introductory APR may be a better option. Many credit cards provide perks like credit monitoring, purchase protection, and rewards programs that BNPL providers don't yet offer, as well.
It's also worth pointing out that buy now, pay later programs don't have the same regulatory oversight as credit cards. According to Consumer Reports, some BNPL users have had trouble with disputes and returns, for example.
BNPL users trust and use BNPL more than credit cards
Among BNPL users surveyed by The Motley Fool Ascent, 53% use BNPL more often than their credit card. Sixty-two percent of BNPL users trust BNPL providers more than credit card companies.
In line with other findings on buy now, pay later usage, younger respondents are more likely to use and trust buy now, pay later services more than their credit card, compared to older respondents.
| Generation | I use buy now, pay later more often than credit cards | I trust buy now, pay later providers more than credit card providers |
|---|---|---|
| Gen Z | 51% | 60% |
| Millennials | 55% | 70% |
| Gen X | 45% | 57% |
| Baby boomers | 31% | 57% |
| Total | 53% | 62% |
Younger generations may be more comfortable with BNPL services and the flexibility that it offers. They may also prefer the relatively transparent BNPL fee structure and the fact that it's a convenient, interest-free option.
Should buy now, pay later replace credit cards?
Everyone has their own needs for financial products. But many of the benefits that buy now, pay later offers are also available from the best credit cards.
In addition to benefits like a 0% introductory APR, credit card owners often have access to credit perks, purchase protections, travel benefits, and more. Plus they help users build credit, while making BNPL payments generally won't impact credit scores.
If a consumer can't be approved for a credit card, a buy now, pay later plan may be their only option if they can't save up enough cash for a purchase. And many people just don't like to use credit cards, but they may want an alternate form of credit, like BNPL.
55% of BNPL users rely on it to buy items they otherwise couldn't afford
Fifty-five percent of BNPL users turn to the service to purchase something they couldn't afford with traditional payment methods, according to data from the Federal Reserve.
There's other evidence that Americans are using BNPL to make purchases outside their budget. Eighty-seven percent use BNPL to spread out payments, which is another way of making an expensive purchase more affordable. Sixty percent use BNPL to avoid interest and 54% use BNPL because they didn't want to use a credit card.
Here's a full breakdown of why Americans use buy now, pay later:
| Reason for using BNPL | 2023 | 2022 |
|---|---|---|
| Wanted to spread out payments | 87% | 87% |
| Convenience | 82% | 83% |
| Avoid interest charges | 60% | 59% |
| Only way I could afford it | 55% | 56% |
| Did not want to use a credit card | 54% | 54% |
| Wanted a fixed number of payments | 46% | 46% |
| Only accepted payment method I had | 21% | 21% |
Electronics remain the most popular use of buy now, pay later
Buy now, pay later is a fairly standard option for consumers in most stores. Here are the most common types of products bought with buy now, pay later, among those surveyed by The Motley Fool Ascent.
- Electronics: 50% (up from 46% in 2023)
- Clothing and fashion accessories: 40% (down from 46% in 2023)
- Furniture and appliances: 40% (up from 31% in 2023)
- Household essentials: 29% (up from 21% in 2023)
- Groceries: 27% (up from 19% in 2023)
- Personal care products and cosmetics: 24% (up from 22% in 2023)
- Books, movies, music, or games: 16% (up from 13% in 2023)
- Other: 8% (level with 2023)
Electronics being the most common category for buy now, pay later purchases is consistent with most Americans using buy now, pay later to buy something otherwise outside of their budget. The same could be said for clothing and fashion accessories and furniture and appliances, the latter of which can be expensive.
More BNPL users are turning to installment plans for staples, like household essentials and groceries. That may reflect economic pressure many Americans are facing after years of inflation.
Most BNPL users keep payments below $100 a month
Fifty-eight percent of BNPL users surveyed by The Motley Fool Ascent have an average total monthly payment of $100 or less.
Overall, 32% owe $50 or less to BNPL providers and 26% spend between $51 and $100 on BNPL each month.
For comparison, the average credit card payment each month was $363 in 2023, according to a survey from New York Life.
A quarter of those who use BNPL make an average payment between $101 and $250 each month and 10% pay between $251 and $500. Just 5% pay between $510 and $1,000.
| Average total monthly BNPL payment | 2024 | 2023 |
|---|---|---|
| $50 or less | 32% | 25% |
| $51 to $100 | 26% | 26% |
| $101 to $250 | 25% | 21% |
| $251 to $500 | 10% | 15% |
| $501 to $1,000 | 5% | 8% |
| Over $1,000 | 2% | 4% |
40% of buy now, pay later users use it at least once a month
Many people swipe a credit card on a daily basis. How does BNPL compare? Here's what our survey respondents had to say:
| Frequency of BNPL use among BNPL users | At least once a week | Once a month | Once every three months | Once every six months | Once a year or less frequently |
|---|---|---|---|---|---|
| Gen Z | 10% | 32% | 24% | 10% | 25% |
| Millennials | 18% | 34% | 19% | 9% | 21% |
| Gen X | 13% | 20% | 18% | 10% | 39% |
| Baby boomers | 8% | 22% | 13% | 8% | 48% |
| Total | 13% | 27% | 19% | 10% | 31% |
The frequency of purchases made with BNPL has remained mostly stable over the past five years, with consumers turning to it more regularly, according to survey data from The Motley Fool Ascent. Each year, between 30% and 40% of respondents who have used BNPL do so once a month or more frequently, and between 30% and 40% use BNPL once every six months or less frequently than that.
| Frequency of buy now, pay later use among BNPL users | At least once a week | Once a month | Once every three months | Once every six months | Once a year or less frequently |
|---|---|---|---|---|---|
| 2024 | 13% | 27% | 19% | 10% | 31% |
| 2023 | 5% | 26% | 25% | 17% | 16% |
| 2022 | 19% | 19% | 23% | 17% | 22% |
| 2021 | 18% | 18% | 19% | 19% | 25% |
| 2020 | 19% | 19% | 23% | 17% | 22% |
41% of BNPL users have experienced issues
Forty-one percent of BNPL users have run into problems when using BNPL services, according to The Motley Fool Ascent's 2024 BNPL Trends Survey.
The most common issue was returning items, cited by 18% of respondents that use BNPL. Sixteen percent had issues getting a refund and 13% said they had other issues. Overall, 59% said they haven't encountered problems with BNPL.
Has buy now, pay later usage plateaued?
Despite BNPL being offered at some of the largest retailers, the percentage of Americans who use BNPL has hardly grown. The percentage of Americans who used BNPL in the last year grew by roughly 2% from 2022 to 2023, from 12.1% to 13.6%.
BNPL providers face other challenges on top of a small and slow-growing customer base. Most who use BNPL aren't making big monthly payments and are using BNPL infrequently. BNPL isn't a popular choice for everyday purchases, either.
Other signs suggest BNPL companies are building loyalty with their customers. The majority of those who have used BNPL trust BNPL providers more than credit card companies and use BNPL more often than they swipe their credit cards.
Another important factor for consumers is their willingness to give up on the benefits credit cards provide, like cash back, points, and credit score upside for making on-time payments.
This field is changing fast -- so we'll be sure to keep an eye on it and report back.
Methodology
The Motley Fool surveyed 2,000 American adults via Pollfish on July 8, 2024. Results were post-stratified to generate nationally representative data based on age and gender. Pollfish employs organic random device engagement sampling, a method that recruits respondents through a randomized invitation process across various digital platforms. This technique helps to minimize selection bias and ensure a diverse participant pool.
Separate surveys with the same methodology were carried out on July 19, 2023, June 29, 2022, March 10, 2021, and July 6, 2020.
Our Research Expert
Jack Caporal is the Research Director for The Motley Fool and The Motley Fool Ascent.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.