Buy Now Pay Later Bills Top $500 for Nearly 1 in 5 Households

What happened

Buy now, pay later (BNPL) has moved from a niche checkout option to a regular monthly bill for many American households. New Bank of America Institute data shows that nearly one in five households using BNPL made a repayment above $500 in September. The bank's October Consumer Checkpoint found that 8.3% of households in its dataset made at least one BNPL payment that month, up from about 5% four years earlier.2

The $500 figure needs some care. It counts repayments made during September. It is not a fixed monthly obligation, and it is not the total a household owes.2 The bank also found that large repayments were slightly more common among wealthier users. More than 21% of BNPL households in its top income group made payments above $500, compared with about 18% in the lowest group.1 Adoption grew across every income band, but it grew fastest among lower-income customers.1

The bank did not treat the numbers as a warning sign. It found no sudden jump in adoption and no broad decline in repayment behavior, even as usage kept rising.1 It also noted that BNPL payments tend to rise over the holidays and fall in the months after.1 My reading is that this is not yet a credit crisis. It is a structural change. Installment plans have become a standing part of household budgets rather than something people use only for big purchases.

From sneakers to groceries

The Federal Reserve's household survey shows the same trend from another angle. In 2025, 16% of U.S. adults used BNPL, up from 10% in 2021.5 Clothing and accessories were still the most common purchases, cited by 49% of users. Electronics followed at 32% and furniture or appliances at 26%. One in five users, though, said they had used BNPL for groceries or food delivery.1

Income makes a big difference. Among users earning under $50,000, 29% had financed groceries or food delivery, compared with 9% of those earning $100,000 or more.1 Use was highest, at 23%, among households earning $25,000 to $49,999.7 Younger adults use it most: 22% of 18-to-29-year-olds and 21% of 30-to-44-year-olds used BNPL in the prior year, against 9% of people 60 and older.5

Other surveys report similar findings. A Freedom Debt Relief survey of 1,010 adults found that 17% had used BNPL for essentials such as groceries, household bills or gas. Nearly a third had opened a new plan while still paying off an older one.9 The Urban Institute estimates that about one in ten working-age adults have bought groceries this way, and about a third of them missed a payment.10

The industry's own data points the same way. PYMNTS Intelligence found that between 87% and 96% of users tied to Affirm, Afterpay, Klarna and PayPal Pay Later reported using BNPL for groceries. Most consumers in that study used two or more providers. Those shares are far higher than the Fed's, which suggests the PYMNTS sample and question wording differ a lot from the Fed's nationally representative survey. Even so, both point to BNPL spreading into everyday spending.

The checkout economics driving it

The growth is no accident. BNPL sells well for merchants. A Federal Reserve note estimated that six major providers lent $156.7 billion in U.S. consumer credit in 2025. Traditional pay-in-four plans made up $78.3 billion of that.1 About 37% of that credit carried interest, so "pay later" is often not free.1

By the Fed's estimate, Afterpay led 2025 U.S. lending at about $53.7 billion. Affirm followed at $41.3 billion, then PayPal at $26.5 billion and Klarna at $23.9 billion.21 Some industry comparisons put Affirm at about a third of U.S. BNPL payment value.22 The gap probably comes from different measures and time periods, but on every measure the market is concentrated among a few lenders.

The two best-known brands have taken different routes. Affirm's gross merchandise volume rose about 37% to $50.2 billion in the fiscal year ended June 30, 2026, and its active consumers grew 21% to 27.8 million.21 Klarna reported $36.6 billion in second-quarter 2026 volume, up 18%, along with 120 million active consumers and more than 1.2 million merchants.21 Affirm focuses on bigger tickets, with an average order of about $255 compared with Klarna's roughly $101. It also earns far more revenue per dollar of volume, largely because most of its loans charge interest.22 Both companies are building card products that bring installment plans beyond the checkout page. Both also joined Google's AI shopping tools in May 2026.22

For merchants, the case is about conversion. Affirm reports up to a 21% relative lift in conversion on purchases of $250 or more. Those are the provider's own figures.21 Merchant fees reported by third parties cluster around 6%, about double a typical card rate.29 Retailers pay that premium because shoppers buy more, and that is why BNPL buttons now appear on nearly every online checkout page.

Investors are less sure about the business. Klarna's shares were down about 55% year to date in early October, while Affirm's were roughly flat.23 Retail partnerships are also shifting. Affirm signed an exclusive deal with Sam's Club in October, 19 months after Klarna won Walmart's BNPL business.26

Late payments: two very different numbers

The sources disagree most on how many users pay late. The Fed found that 26% of BNPL users made at least one late payment in 2025, up from 15% in 2021.5 Among users earning under $25,000, the rate was 40%.4 Among late payers, 64% said they were charged extra, and 11% of all users said a BNPL payment caused an overdraft or insufficient-funds fee.51

LendingTree's tracker shows a worse picture: 47% of users said they paid late in the past year, up from 41% in 2025 and 34% in 2024.18 It also offers some reassurance. Of those who paid late, 72% said their latest late payment was a week or less overdue.18

The industry points to default data. The CFPB found that BNPL borrowers defaulted on 2% of their BNPL loans between 2019 and 2022, compared with 10% of their credit cards.7 These numbers do not contradict each other. Charge-off rates show whether lenders eventually get paid. Late-payment surveys show how much strain borrowers feel along the way.13 Both can be true: lenders can get their money back while many households struggle to keep up.

The stacking problem nobody can see

The bigger structural risk is that lenders and borrowers often cannot see the full picture. CFPB research on 2022 lending found that about 63% of BNPL borrowers had several loans open at once, and a third borrowed from more than one provider.4 Freedom Debt Relief found that 77% of Gen Z users were unsure how much they owed across all their plans.9

Credit reporting has not fixed this. Affirm reports its loans to Experian and TransUnion. Klarna and Afterpay do not report U.S. pay-in-four data, arguing that older scoring models would unfairly penalize their customers.14 FICO introduced BNPL-aware scores in June 2025. It later said they would be available at the bureaus only once BNPL data was reported at scale, and that has not happened yet.15 TransUnion said in October 2026 that it had made a limited set of BNPL attributes available to a single lender partner, and that they do not affect consumer credit scores.17 Some consumer guides claim that all three bureaus now include BNPL in standard reports.11 The bureaus' and FICO's own statements contradict that, and they are the better evidence.

A regulatory split

U.S. federal oversight has weakened. In 2024 the CFPB said BNPL lenders should be treated like credit card issuers. It withdrew that rule in May 2025 and has said it does not plan to reissue it.12 States are stepping in. New York's Department of Financial Services proposed rules in July 2026 that would cap charges at the state's 16% usury limit, restrict late fees and require APR disclosures.14 The UK has gone further. Since July 15, 2026, interest-free BNPL from third-party lenders has been regulated consumer credit, with required affordability checks.19

Why it matters now

The holiday season is when these trends peak. About half of consumers surveyed by consulting firm TSG say they plan to use BNPL this season. Twenty percent expect to use it more than last year, while 9% expect to use it less.10

My reading is that the Bank of America data does not show a system about to break. It shows a quieter change. Short-term debt is spreading across households, especially lower-income ones paying for necessities. That debt is mostly invisible to credit bureaus and only loosely regulated in the U.S. Pay-in-four can be a sensible cash-flow tool. But with the checkout button this easy to use, the credit system's poor visibility into BNPL debt will matter more each season.