Americans are turning to Buy Now, Pay Later to pay for groceries, bills

In 2023, Americans spent over $160 billion using buy now, pay later plans, according to research from Federal Reserve economists. Experts say these services are being utilized for everyday needs such as groceries, bills, transportation, and even rent. Sara Rathner, a credit card expert at NerdWallet, notes that the tough job market and rising costs have made buy now, pay later an appealing option.

Pay-in-four plans, allowing consumers to pay in four installments over six weeks, accounted for half of the spending, and usage increased by nearly 80 percent since 2023. The remaining spending was distributed among longer- or shorter-term loans.

Elizabeth Brown, a 26-year-old from South Carolina, first turned to buy now, pay later when starting to live alone and earning a salary that didn't cover basic expenses. Now, six years later, she still relies on it for groceries and furniture purchases. Brown feels the service is beneficial but doesn't find any shame in using it.

Buy now, pay later services have evolved, with some companies offering "rent now, pay later" options, breaking rent into multiple payments. Mark Elliott, chief customer officer at Happen Bank, highlights that these services are no longer just a convenience but can create a cash flow challenge.

Jordan Williams, a 28-year-old lecturer from North Carolina, started using buy now, pay later for concert tickets and later for groceries during financial hardship. While she felt ashamed initially, she now feels less alone after connecting with others facing similar debt issues.

Experts advise carefully reading the contract before using buy now, pay later services, as not all terms are favorable. Missed payments can lead to fees, interest, or service bans, which were previously not reported to credit bureaus. However, recent changes mean missed payments can now impact credit scores.

Carla Sanchez-Adams, a senior attorney at the National Consumer Law Center, advises against stacking multiple buy now, pay later loans, as it can become difficult to track payments and lead to overwhelming debt. If facing multiple loans or credit card debt, seeking help from a nonprofit credit counseling agency can provide guidance and resources to manage the situation.