Americans with low credit scores use ‘Buy Now, Pay Later’ more often

New York (CNN) — Financially fragile Americans are more likely to frequently use “Buy Now, Pay Later” programs, with the majority using the short-term installment payments five or more times a year, according to new research released Wednesday by the Federal Reserve Bank of New York.

Posted 3:19 p.m. Feb 14 — Updated 3:19 p.m. Feb 14

Alicia Wallace

, CNN

CNN — New York (CNN) — Financially fragile Americans are more likely to frequently use “Buy Now, Pay Later” programs, with the majority using the short-term installment payments five or more times a year, according to new research released Wednesday by the Federal Reserve Bank of New York.

“Financially fragile” individuals — those who have a credit score under 620 or were declined for a credit application or fell delinquent on a loan in the past year — are more than three times as likely as financially stable individuals to use BNPL multiple times a year, New York Fed researchers wrote Wednesday in a Liberty Street Economics blog post.

Nearly 60% of financially fragile consumers have used BNPL five or more times a year, with nearly 30% of them conducting 10 or more BNPL transactions annually. That compares to just over 20% and 10%, respectively, for more financially stable users.

“More-fragile households tend to use the service to make frequent, relatively small, purchases that they might have trouble affording otherwise,” researchers wrote in the post.

New York Fed researchers delved into recently collected consumer survey data to determine who is being offered BNPL options and who uses them. They drew on past research as well as data collected as part of the October 2023 Survey of Consumer Expectations Credit Access Survey, which included a set of BNPL-specific questions.

As such, Wednesday’s research does not include BNPL use during this most recent holiday season.

Buy Now, Pay Later offerings have exploded in use and availability in recent years, allowing people to make (often short-term) installment payments on furniture, travel, concert tickets, food delivery and even the grocery store.

Economists, attorneys general and consumer advocates have raised concerns about BNPL, noting that a lack of data, transparency and formal regulations make it difficult to know and track just how much additional debt consumers are incurring.

This story is developing and will be updated.

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