The way Americans pay for everyday necessities appears to be shifting, with a growing number turning to installment plans even for basic purchases like groceries.
This trend, highlighted in a recent survey, offers a stark glimpse into the mounting economic pressures facing consumers and the evolving role of Buy Now, Pay Later (BNPL) services.
Data released by the lending marketplace Lending Tree reveals a significant jump in the use of BNPL options for grocery shopping.
According to their survey of 2,000 American adults conducted in early April, a full quarter (25%) of shoppers reported using BNPL services for groceries.
This marks a substantial increase from just 14% who reported doing so a year prior.
While offering flexibility, the trend also comes with potential downsides.
The same survey found that 41% of BNPL users admitted to having paid back a loan late over the past year, although the majority settled their debt within a week.
Notably, the data indicated that men, younger consumers, and those with higher incomes were statistically more likely to have made late payments.
Economic anxiety fuels BNPL adoption
This rise in financing essential goods coincides with growing unease about the overall health of the economy.
Persistent uncertainty surrounding potential tariff impacts and interest rate directions has fueled recession fears.
Consumer sentiment reflects this anxiety, weakening considerably in recent readings – the index dropped to 52.2 last week from 57 the month before.
Furthermore, a poll by The Associated Press–NORC Center for Public Affairs Research found roughly half of Americans are “extremely” or “very” concerned about a potential recession hitting in the coming months.
“It’s pretty clear that as people struggle with inflation and other kinds of economic uncertainty, people are looking to things like BNPL loans to help them extend their budget,” Matt Schulz, Lending Tree’s chief consumer finance analyst, explained to Fortune.
The allure and risk of frictionless borrowing
BNPL services, which allow consumers to split purchases into smaller, typically interest-free installments, have gained traction partly because they offer an alternative to traditional credit cards and the associated interest charges.
For many, this presents a seemingly lower-risk way to manage expenses.
However, the ease and near-frictionless nature of accessing BNPL credit can also encourage overspending and lead consumers into accumulating debt across multiple platforms.
Critics also point to the potential for significant hidden late fees if installments are missed, turning a seemingly free service into a costly one.
From designer goods to dinner tables
Initially, BNPL services gained popularity among consumers financing larger, often discretionary purchases – think electronics, appliances, or luxury fashion.
The growing prevalence of BNPL for groceries signals a potentially significant shift in consumer behavior and financial priorities.
“When buy-now, pay-later started, it was typically about designer handbags and appliances and things like that,” Schulz observed.
But now people are looking at it for things like groceries and food delivery.
This expansion into everyday essentials is evident in recent partnerships, such as DoorDash collaborating with Klarna last month to allow customers to delay or split payments on food orders.
Yet, BNPL remains popular for big-ticket items too; Billboard noted that 60% of general admission ticket holders for the Coachella music festival utilized a payment plan, breaking down the $599 cost into smaller chunks starting as low as $49.99 upfront.
A ‘gambling economy’ or perceived safety net?
The increasing ubiquity of BNPL, especially among younger demographics, might suggest a growing comfort with, or perhaps desensitization to, financial risk.
Gen Z economic commentator Kyla Scanlon recently remarked on social media, “We have a gambling economy… We have memecoin, sports betting… and we can do it completely frictionless.”
Conversely, consumers typically become more risk-averse during periods of economic uncertainty.
The rising use of BNPL for essentials could indicate that many consumers perceive these services as a less risky option than traditional credit, despite the fact that BNPL usage generally doesn’t help build a credit history, which can be crucial for long-term financial health.
Given the current economic climate, Schulz predicts the popularity of BNPL for all types of purchases, including essentials, is unlikely to wane.
“I don’t think there’s any reason to believe that this is going to do anything but increase,” he stated.
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