Short-term installment plans known as buy now, pay later are no longer reserved for impulse purchases — more Americans are using them to cover groceries, medical bills and other essentials. That shift matters now because rising use, higher credit card balances and an increase in interest-bearing BNPL products are creating fresh risks for households already stretched by inflation.
Usage of these payment plans has climbed sharply. Federal Reserve estimates show BNPL providers originated nearly $157 billion in consumer credit products in 2025, up from about $116 billion the year before, signaling rapid growth in a space that regulators and consumer advocates are watching closely.
Consumers lean on BNPL for basics
For many shoppers, BNPL has moved from convenience to necessity. Surveys and interviews point to families splitting everyday costs when cash is tight — a trend that accelerated as living costs rose and credit-card borrowing increased.
One borrower described maxing out her credit cards after an emergency transport and then using installment plans to buy groceries and cover other immediate needs. She said the short-term loans helped bridge gaps but also left her feeling trapped by a steady stream of payments.
- Origination growth: BNPL originations rose to nearly $157 billion in 2025 (Federal Reserve).
- Intent to use: A LendingTree poll found 44% of Americans expect to apply for a BNPL loan within six months; 13% plan to take out three or more.
- Essentials financed: LendingTree reports 29% of BNPL users have used it for groceries (up from 14% in 2024); other uses include car repairs and rent.
- Medical and utilities: A Protect Borrowers survey found 42% of BNPL users paid for medical or dental care with these plans; 39% used them for utility bills (Data for Progress/Protect Borrowers).
- Missed payments: LendingTree found 47% of BNPL users missed at least one payment in the past year, up from 34% the previous year.
How small loans can become costly
Many BNPL products advertise short, interest-free schedules — the familiar “pay in four” model that splits a purchase into four installments over six weeks. But the market is changing.
More lenders now offer longer plans that carry interest. A recent analysis from consumer advocates found that interest-bearing BNPL accounted for over 37% of annual BNPL issuance in 2026, nearly double its share in 2021. That mix increases the chance consumers will face ongoing finance charges.
Late or missed payments are another pressure point. Some providers tack on fixed late fees, commonly around $7 to $8 per missed installment, while other plans assess interest and financing charges that can push effective rates much higher.
Consumer advocates warn that stacked penalties and interest can quickly turn a modest short-term purchase into a high-cost burden. As one nonprofit credit-counseling leader put it, many people only turn to BNPL after exhausting other credit options — and once payments are missed the situation can spiral.
Industry response and consumer protections
Fintech trade groups argue BNPL gives shoppers useful flexibility when budgets are tight, emphasizing transparency and short-term financing as benefits. But consumer advocates and some policy experts say the rapid expansion, and the growing share of interest-bearing products, call for clearer consumer protections.
Regulators in the U.S. and abroad have started scrutinizing BNPL features like underwriting, disclosure of fees and debt-collection practices. The key questions for policymakers include whether these loans should be subject to the same rules as traditional installment credit and how to ensure borrowers fully understand costs before they sign up.
For now, financial counselors recommend consumers treat BNPL like any other credit product: review the full repayment schedule, note any late fees or interest, and avoid stacking multiple plans at once. Those already juggling payments may benefit from contacting a nonprofit credit counselor to explore consolidation or budgeting alternatives.
Why this matters: As BNPL becomes a tool for paying essentials, more households face the real possibility that short-term convenience will lead to longer-term financial strain — a dynamic with broad implications for consumer finance and regulatory oversight.
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.