Buy now, pay later (BNPL) programs allow shoppers to purchase an item with payments and typically no interest rates. They aren’t new, but they’re gaining popularity as online shopping platforms adopt similar programs to encourage purchases. Following its 200 percent growth in 2020, these programs are expected to swell another 10–15 percent in market value. 

Buy now, pay later services are so appealing because they don’t profit off of heavy interest rates and fees from users, and instead make their profits off of merchant fees. This means American consumers get to save some financial stress without having to spend more, like with credit cards and loans. This is a huge relief for Americans considering how significantly purchasing power has dropped with decades of wage stagnation. 

As 45 percent of Americans have used buy now, pay later programs, we wanted to learn more about what they’re buying and why. Here’s what we learned:

  • 44 percent of Americans who use BNPL choose to due to a lack of funds
  • 47 percent of Americans would buy furniture with delayed payments — the most popular item to buy
  • Gen Z (ages 18–24) are the most likely to use BNPL to cover costs they can’t afford
  • A majority of Americans (40 percent) prefer bank loans over BNPL to cover expensive costs

What is Buy Now Pay Later?

illustration

Buy now, pay later programs let shoppers purchase items and pay later within a defined number of payments or timeline.

Source: Coupon Chief

illustration

Women are 38% more likely to buy furniture than men, while men are 22% more likely to purchase electronics.

Source: Coupon Chief

44% of Americans Use Payment Plans Due to Lack of Funds

While a majority of Americans (54 percent) still haven’t used a buy now, pay later program, many more appreciate the flexibility of payments to reduce the financial and emotional burden of expensive purchases. 

Chart shows that a majority of Americans (44%) use buy now, pay later programs when they can't afford the item they want to buy.

Of those who use BNPL, 44 percent turn to these programs because they simply don’t have the money to cover the costs up-front. These programs are mostly used for home goods, like furniture and electronics, so it’s no surprise that lower-earning Gen Z and young Millennials are the most interested in BNPL. 

Still, another 31 percent of consumers are interested in reducing the emotional toll of large purchases — mostly stress. Young Americans, ages 25–34, even value the stress-relief of payments (12 percent) over the chance to avoid credit card debt (11 percent). 

A recent survey found that 73 percent of citizens report experiencing financial stress, making it the largest source of stress in the country. It’s no surprise that many Americans are looking for relief. Especially during high-spending seasons like back-to-school and holiday shopping, BNPL services allow consumers the opportunity to stretch their dollar a little further. 

Nearly Half of Americans Use BNPL to Furnish Their Homes

Buy now, pay later programs aren’t being used frivolously, as 47 percent of Americans are using them to furnish their homes, while another 20 percent are buying electronics. These big-ticket items can be essential lifestyle costs and also happen to be some of the most expensive items in your home.

Illustrated furniture and decor sits next to the statistic "women are 38% more likely o buy furniture than men, while men are 22% more likely to purchase electronics.

Gifts for others was the third-most-popular choice, and 13 percent of Americans would use BNPL to cover gift-giving expenses. Millennials are the most generous generation, as 16 percent use payments to buy gifts. BNPL programs are an attractive option to curve holiday debt when Americans spend an average of $918 each year on Christmas gifts. 

Still, another 12 percent use BNPL to cover personal wants including beauty (six percent) and fashion (six percent) purchases. These are most popular with young adults between 18–34 years-old with 16 percent of young men and women purchasing makeup and clothing with BNPL programs. 

Best Items to Buy Now, Pay Later

Of course, our best piece of advice is that if you can’t afford an item, then you shouldn’t risk the heavy financial burden of missing a payment and instead budget to buy. However, that’s not always realistic. Here are the items we recommend you buy now, pay later to avoid breaking the bank:

  • Interview and work clothes can be expensive, especially if you’re new to your career or between jobs. Build your work wardrobe before you start at the office. 
  • Furniture like a mattress, sofa, and dining table are essential for your day-to-day life. If you need to furnish your home, buy and pay off one item at a time. 
  • A computer and cell phone are practically required for our daily lives in work and school. BNPL is a great way to cover an emergency repair or purchase, but be mindful of what you can realistically afford. 
  • Cookware is a great investment that will help you save on eating out and will last you a long time. It can also be pricey, so relieve the stress with payments. 

40% of Americans Rely on Bank Loans to Cover Costs They Can’t Afford

When looking at surprise expenses or pricey lifestyle items like furniture, most Americans still turn to bank loans to buy. Buy now, pay later programs are growing though, especially among young Americans who may not have the credit available for loan approval.

A chart shows that a majority of Americans (41%) would use a bank loan to buy an item they couldn't afford, while 31% would use buy now, pay later programs.

In addition to approval wait times and credit requirements, bank loans also charge interest over time that can add up — especially with large loans. This is also true for credit cards and cash advances, which can keep you in debt much larger than you initially planned for. 

Average Interest and Fees by Payment Method

Payment MethodsInterest RateAdditional Fees
Bank Loans3–36%1–8% Total Loan
Buy Now, Pay LaterTypically NoneTypically None
Cash Advance20.38% APR3–5% Total Cost
CrowdfundingNone5–8% Service + Card
Processing Fee

Men are especially likely to cover costs with risky and interest-heavy services. According to our survey, they’re 12 percent more likely to take out a bank loan or apply for a cash advance than the average American. 

On the other hand, women still prefer bank loans but are almost equally as likely to use a BNPL service. They’re also 15 percent more likely to turn to friends or family for help than men, avoiding costly interest rates and debt. Previous research has highlighted how women are more interested in financial security than risk and may tend to make better financial decisions. 

Your Guide to Buy Now, Pay Later 

So, is buy now, pay later right for you? There’s a lot to consider before you buy anything, and the most important is how you can realistically pay the purchase costs. BNPL typically offers three payment methods:

  • Pay in full within 30 days, no fees or interest charges
  • Make payments with a set number of installments, typically 3–4, no fees or interest
  • Finance your purchase and split the cost over time, may include interest charges

If you’re positive you can meet the repayment requirements, then BNPL services are an easy way to purchase with a little less stress on your bank account. However, if you’re unsure you can repay your costs, then you’ll want to calculate any discounts, interest rates, or fees to make the best purchase decision.  

Five Best Buy Now, Pay Later Apps

If you’re looking to buy something quick, there are several BNPL services to choose from. The best one for you depends on where you’re shopping and they all work a little differently. Here are some highlights of the most popular BNPL apps to help you decide:

  • PayPal works online and in physical stores, allowing you to split your purchase into four payments. 
  • Amazon offers built-in payment options for many of its products, splitting the cost into five payments over 120 days. 
  • AfterPay has partnered with popular retailers so you can split expenses up to $1,000 over four payments with no credit requirements. 
  • Klarna works with any online retailer using a “ghost card” that splits your cost into four payments. 
  • Splitit breaks your cost into monthly payments (up to 24) with no interest at participating retailers.

Buy now, pay later services are growing in popularity as an alternative to expensive credit card fees for Americans of all ages. They’re a great option to buy expensive necessities or reduce the stress of pricey purchases. Still, it’s important to take care that you can afford to repay the cost on-time and avoid using BNPL to splurge on costly and unnecessary items. 

Survey Methodology

This study consisted of three questions conducted by Coupon Chief through Google Surveys. The sample consisted of no fewer than 1,500 completed responses per question. Post-stratification weighting has been applied to ensure an accurate and reliable representation of the total population. The survey ran in December 2020.

Sources: WalletHub | CNBC | Bankrate | The Balance

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