Buy now, pay later is the new financial lifeline for lower-income Americans, as consumer loans pile up to $19 trillion | Fortune

Buy now, pay later lets shoppers split everyday purchases into short-term installments, often with no interest and instant approval. The service has spread from app-based providers into major retail stores, covering items from groceries to holiday gifts. Use has grown sharply, with more than half of Americans reporting at least one online use. Loan originations and dollar volumes have surged over recent years. The original appeal included avoiding credit card requirements and minimizing impact on credit reports. However, the same frictionless access has drawn heavier use from lower-income households and from people more worried about paying bills. For many, installment plans shift from convenience to an additional debt burden.

"Buy now, pay later has morphed from a trend into a fixture of an American shopping experience. Kicked off through apps such as Klarna and Affirm years ago, the feature is now available in big box stores around the country, as Americans can now shop for everything from groceries and household goods to Christmas presents and pay in short-term installments."

"Slightly more than half of Americans have used buy now, pay later at least once for an online purchase, according to a Gallup poll released Monday. It's been a meteoric rise in use for this kind of plan. Between 2019 and 2021 alone, the number of loans originated in the U.S. under buy now, pay later grew from 16.8 to 180 million, a 970% increase, while the dollar volume of those loans climbed more than 1,000% to $24.2 billion, according to a 2022 report by the Consumer Financial Protection Bureau."

"Buy now, pay later was initially designed to help young people shop without having to worry about needing a credit card or hurting their credit report. The trend's promise of no interest, no hard credit check, and instant approval at checkout have made buy now, pay later one of the most frictionless credit instruments American consumers have wide access to."

"But there's a downside to buy now, pay later's near ubiquity. The product's ease of use has made it particularly attractive for lower-income households, and the Gallup poll found the use of installment plans rises in tandem with how worried consumers are about aspects of their finances, such as paying off a credit card bill. For a rising number of Americans, buy now, pay later has become less of a convenience, and mostly just another debt burden."

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