Buy Now Pay Later Use Climbs as 1 in 5 Users Top $500 Payments

What the new data shows

Buy now, pay later has become a regular part of how many Americans pay their bills. It is no longer just a checkout novelty. The Bank of America Institute's October Consumer Checkpoint found that 8.3% of households in its banking data made at least one BNPL payment in September, up from about 5% four years earlier.2 Nearly one in five of those households repaid more than $500 to installment lenders that month.1

The $500 figure is easy to misread. It counts what a household repaid during September. It is not a fixed monthly bill, and it is not the household's total outstanding balance.2 The headline makes it sound like a standing obligation, and it isn't one. The number shows how much money flowed back to lenders in one month, which can include several plans ending at the same time.

The breakdown by income cuts against the usual story. Lower-income customers showed the fastest growth in BNPL adoption. But the biggest repayments were more common among wealthier users. More than 21% of BNPL households in the bank's top income tier paid over $500, compared with about 18% in the lowest tier.1 The bank also said it saw no sudden jump in adoption and no broad decline in repayment behavior.1

Moving from wants to needs

The more important change is what people are financing. Federal Reserve survey data released this year shows that 16% of U.S. adults used BNPL in the past year. Clothing and accessories were the most common purchases (49% of users), followed by electronics (32%) and furniture or appliances (26%).1 One in five users also financed groceries or food delivery.1

Income makes a big difference here. Among users earning under $50,000, 29% had put groceries or food delivery on a BNPL plan, compared with 9% of users earning $100,000 or more.1 Higher earners more often used installment plans for travel.1 Other surveys point the same way. A Freedom Debt Relief poll of 1,010 adults, taken in July, found that 17% had used BNPL for essentials like groceries, household bills or gas.8 The Urban Institute reports that roughly one in ten working-age adults bought groceries this way, and about a third of them missed a payment.9

Together, these numbers explain why reading the $500 figure as a sign of wealthy shoppers buying big-ticket items misses much of the risk. Large repayments from high earners are probably mostly about managing cash flow. For lower earners, the concern is smaller but recurring plans used to cover groceries.

Late payments are rising faster than usage

The Fed's long-running data is the most useful guide here. Adult BNPL usage rose from 10% in 2021 to 16% in 2025. Over the same years, the share of users who paid late rose from 15% to 26%.5 In other words, late payments have grown faster than usage.

Late payments are spread unevenly. Among users earning under $25,000, 40% paid late in 2025. That compares with 33% of those earning $25,000 to $49,999 and 11% of those earning $100,000 or more.47 Young adults are both the heaviest users and the most likely to slip: 22% of 18-to-29-year-olds used BNPL, and 32% of those users paid late.5 Of users who paid late, 64% said they were charged extra. Separately, 11% of all users had a BNPL payment trigger an overdraft or insufficient-funds fee at their bank.7

From these same numbers, the coverage draws two different conclusions. A widely shared economics commentary describes Americans as "borrowing to survive" and ties BNPL growth to a weakening job market and rising delinquencies.4 Bank of America's own analysts, by contrast, did not call the trend an immediate crisis.4 The Fed's survey adds that 87% of users chose BNPL to spread out payments and 82% for convenience, so many users are making a deliberate cash-flow choice.1

Our reading is that both views are partly right, but the bank's caution fits the overall figures better. The survival story fits the lower-income group closely. Even so, the CFPB's earlier research found BNPL borrowers defaulted on just 2% of their BNPL loans from 2019 to 2022, compared with 10% of the credit cards they held.7 Paying late often costs a fee without turning into a default. The real problem is that the strain is concentrated among households that can least afford it, and the overall averages hide that.

The visibility problem

The most lasting concern in the coverage is not any single loan's size. It is that nobody can see all of a borrower's loans at once. Many short-term pay-in-four loans are still not routinely reported to the major credit bureaus. That makes it hard for any lender to know how much a borrower owes across different apps.1 CFPB research on 2022 activity found that 63% of BNPL borrowers had several loans open at the same time, 33% borrowed from more than one provider, and the average borrower took out 9.5 loans that year.4

Consumers have trouble keeping track too. In the Freedom Debt Relief survey, 31% had opened a new plan while still repaying an older one. Among Gen Z respondents, 77% were unsure how much they owed across all their plans.8 A Primerica survey found that 68% of middle-income respondents had little or no flexibility in their monthly budgets. It described BNPL and subscriptions as splitting household spending into pieces that are hard to see as a whole.610 Confusion about credit adds to this. In the Fed's 2025 survey, 38% of users believed BNPL builds credit history, and only 14% answered both credit-knowledge questions correctly.7

Providers handle reporting very differently. Affirm reports all its products to Experian and TransUnion and charges no late fees. Klarna can charge up to $7 per missed pay-in-four installment, capped at 25% of the order. Its reporting of short-term plans varies.13 FICO introduced its first scores that include BNPL data in 2025.7 Meanwhile, federal policy has moved the other way: a 2024 rule that would have given BNPL users credit-card-style protections was withdrawn in 2025.7 Supervision now falls largely to states such as California, which treats BNPL as lending that requires a license.7

Checkout economics drive the expansion

The business side explains why BNPL keeps spreading at checkout. A Federal Reserve note estimated that six major providers originated $156.7 billion in U.S. consumer credit in 2025. Traditional pay-in-four plans made up $78.3 billion of that, and 37% of the total carried interest.1 Afterpay led with an estimated 34% share of issuance, followed by Affirm at 26%, PayPal at 17% and Klarna at 15%.11

Both leading pure-play lenders are growing. Affirm processed $50.2 billion in fiscal 2026, up from $36.7 billion, and reached 27.8 million active consumers.11 Its revenue for the year was $4.26 billion.14 Klarna's second-quarter GMV rose 18% to $36.6 billion, and its merchant count rose 54% to more than 1.2 million.11 For retailers, the appeal is clear. Affirm says it can raise conversion by up to 21% on purchases of $250 or more, though that figure comes from the company itself.11 Adobe-based data puts U.S. online BNPL spending at $20 billion last holiday season, with $21.3 billion forecast for this one.11 Mobile accounted for 82.2% of last year's BNPL holiday purchases.11

The two companies make money in different ways. Klarna collects about 2.7% of transaction volume as revenue, mostly from merchant fees on interest-free short-term loans. Affirm collects about 8.9%, largely because most of its installment loans carry interest.13 Both are moving toward cards that work like ongoing accounts. Affirm Card GMV grew 146% year over year in its fiscal third quarter.13 Both providers have also been available in Google's AI shopping flow since May.13 That suggests BNPL is becoming built into checkout infrastructure rather than offered as a separate add-on.

Investors are uneasy anyway. Klarna shares were down 55% for the year as of early October.16 Affirm dropped 10% in one session after a hot inflation report pushed yields higher, a reminder that its funding depends on market rates.12

What to watch this holiday season

The next test comes soon. Roughly half of consumers surveyed by consulting firm TSG plan to use BNPL this holiday season. Twenty percent expect to use it more than last year, compared with 9% who expect to use it less.9 Bank of America notes that BNPL payments usually rise through the holidays and then fall in the following months.1 That means the clearest read on household strain will come early next year, when January and February repayments arrive alongside regular bills.

Based on the evidence so far, BNPL looks less like a hidden debt bomb than a slowly widening gap in what lenders and households can see. Lenders are still being repaid. But a growing share of households, especially younger and lower-income ones, are juggling payment schedules they cannot fully track, at a checkout that keeps making installment plans the easiest option. Until reporting improves across providers, neither lenders nor regulators can see the full picture.