3 Worrisome Trends of Buy Now, Pay Later

Like with a niece or nephew you haven’t seen in a while, you might be curious how buy now, pay later (BNPL) has grown since it emerged at the start of the decade. Well, it hasn’t had a ton of supervision.

Consumers with subprime or deep subprime credit account for 61 percent of BNPL borrowing, according to a January report from the Consumer Financial Protection Bureau (CFPB). The analysis also noted that BNPL customers were more likely to have higher unsecured debt balances than their peers. 

Because BNPL lenders typically don’t report to the national credit bureaus, we don’t have a large trove of data to evaluate. In fact, the CFPB report came as a result of its March 2023 market monitoring order to a half-dozen pioneering lenders (one of which, Klarna, turns 20 this year).

Here’s what we do know: 100-plus million Americans have used this point-of-sale loan, according to Transunion‘s mid-2024 estimate. And at this juncture, the product (and its oversight) may have a lot of growing up to do.

1. BNPL borrowers are likelier to have higher debt balances on other accounts

Buy now, pay later was cracked up to be the safer alternative to credit cards and their potentially exorbitant interest rates. But the CFPB’s data suggest that many consumers are relying on it not as an alternative, but as a supplement.

In fact, consumers who borrowed at least one BNPL loan during the report period (2021 to 2022) were deeper in debt on other forms of unsecured credit than peers who hadn’t utilized BNPL. How much deeper?

This finding echoed the CFPB’s March 2023 survey, which showed that BNPL borrowers relied more heavily on other forms of debt, were utilizing a higher percentage of their credit limits and were potentially more susceptible to loan stacking.

Why this is scary: BNPL’s biggest calling card (accessibility) causes its biggest pitfall: The more you’re approved to borrow, the less funds you may have to repay your existing debt. Then come the consequences.

2. Many BNPL borrowers are borrowing again and again

It’s not hard to explain BNPL’s pickleball-like popularity:

• These at-checkout loans are easier to apply for than a credit card or personal loan, requiring as little as a soft credit inquiry.
• The traditional “pay-in-four” BNPL loans typically don’t carry interest rates. The standard terms call for four payments over six weeks.
• They’re far safer for short-term repayment than payday loans and title loan.

Widespread access and potentially lower cost also explains why so many BNPL borrowers are repeat customers. About 63 percent of BNPL users take out simultaneous loans, says the CFPB. Even more surprising: The average annual number of loans per borrower reached 9.5 for 2022 (up from 8.5 in 2021).

Why this is scary: About 56 percent of BNPL users have experienced issues with this loan type, according to an April 2024 survey from Bankrate. And even if borrowers successfully repay their BNPL loans most of the time as data indicates, those that overextend themselves could be in for surprises. Yes, BNPL lacks credit card-like interest rates, but missing a payment could result in fees and credit consequences, not to mention the potential of facing debt collectors.

3. A majority of BNPL borrowers don’t have good credit

Borrowers with deep subprime credit (defined as credit scores below 580) comprised 45 percent of BNPL originations between 2021 and 2022, according to the CFPB report. And peers with subprime credit (580 to 619) accounted for 16 percent.

At the same time, BNPL approval rates are on the rise, partly because lenders have increased their use of counteroffers. Instead of turning a less-creditworthy applicant away, a lender might offer a lower loan amount or require them to make a larger down payment toward their purchase.

Better-credit borrowers aren’t lifting the average approval rate, either. In 2022, BNPL companies approved 78 percent of applicants who had deep subprime or subprime credit.

Why this is scary: There’s an oft-misunderstood relationship between your credit and BNPL: When you repay your debt on time, it won’t help your credit — but when you’re late, it could harm it (if the lender reports the missed payment to the national credit bureaus).

These facts leave bad-credit borrowers in the lurch. BNPL doesn’t give them a pathway to improving their credit so that they can one day access consumer loans (and mortgages) at competitive interest rates. And it doesn’t protect their already imperfect credit from further damage if their BNPL repayment goes awry.

What’s next for BNPL?

In a word, adoption, even more widespread than today. Just look at its trajectory to date: The CFPB noted in its 2022 report that lending volumes increased tenfold from 2019 to 2021. And more recently, Straits Research estimated the global market (of which the U.S. dominates) would expand by a factor of eight between 2025 and 2033.

Sure, we’ll continue to see surges during the holidays, spanning Black Friday to Cyber Monday in particular, and for other seasonal peaks, like back-to-school shopping. But BNPL lenders are already eyeing market expansion: How do they make BNPL work for bigger-ticket purchases like airfare and cars, perhaps even healthcare bills?

In early 2025, we now have to ask whether that growth will go unsupervised. The newly-installed Trump Administration has acted swiftly to at least pause the CFPB’s oversight of, not just BNPL, but all consumer financial products. On Jan. 31, Trump appointed Treasury Secretary Scott Bessent as acting CFPB director, replacing the fired Rohit Chopra. Three days later, Bessent ordered the agency to halt its rulemaking, enforcement and litigation.

Politico reported that Bessent could quickly void Chopra’s recent efforts to curtail BNPL lenders. Last May, the CFPB issued an interpretive rule declaring that BNPL customers should be “entitled to some of the same rights and protections of the Truth in Lending Act that apply to traditional credit cards.”

The rule, if it remains in effect, would force lenders to:

• Investigate and resolve customer-initiated disputes, including by pausing repayment obligations and issuing credits (as appropriate).
• Award refunds for returned or canceled purchases that hinged on BNPL credit.
• Furnish credit card-like billing statements to make customers aware of their repayment.

But the fallout of potentially removing the rule and its intentions could impact the most vulnerable of BNPL customers.

“With minimal protections in place, consumers already struggling in debt are being drawn further into financial hardship,” says Phoebe Hodgson, an analyst for GlobalData, which updated its forecast in January 2025 to estimate the BNPL market growing by 79 percent between 2024 and 2028 (from $134.5 billion to $240.8 billion).

Consider one more sign of how far the CFPB still has to go in its oversight efforts: The agency’s consumer complaint database doesn’t list BNPL as a menu option.

How to use BNPL responsibly

The market often outpaces the regulation meant to rein it in, and our best guess is that BNPL will stay ahead of the CFPB over the next four years, if only because the Trump Administration has brought uncertainty to the federal government’s key watchdog agency.

“BNPL providers in the U.S. must balance growth with responsible lending practices,” says Hodgson, adding later: “Until meaningful regulation is solidified in the market, education is key to understanding the pros and cons.”

With that in mind, consider strategies to protect yourself, whether you opt to borrow from one of the worst or best BNPL apps.

• If you’re eyeing a “want” as opposed to a “need,” consider a new BNPL loan only after paying off your existing debt.
• Pay attention to lender terms, considering that lenders are now offering BNPL products beyond the typical model of four payments over six weeks. And be wary of months-long terms with credit card-like APRs for loans that are BNPL in name only.
• Budget your BNPL payments and confirm your potentially variable payment due dates to avoid late payment and overdraft fees.
• Better yet, avoid BNPL borrowing altogether by creating a budget and saving up. Many retail purchases may not merit the risk of borrowing.

“At the end of the day, it all comes back to how you use BNPL,” says Bankrate senior credit card analyst Ted Rossman. “For some people, it’s a viable way to spread out their cash flow and afford purchases, while it can represent a slippery slope into debt for others.”

“BNPL may feel more responsible than open-ended credit card debt, since [it] has fixed fees and terms. But it’s still debt. Consumers should remember that.”