‘Buy Now, Pay Later’: A New Wave of Consumer Debt

Stacy Cowley, a reporter for The New York Times, discusses the rapid rise of buy now, pay later (BNPL) loans and their implications for American consumers. These short-term installment loans have exploded in popularity, especially since the pandemic, offering an easy and often cheaper alternative to traditional credit cards. However, their increasing use, particularly among financially vulnerable populations, raises concerns about a new wave of consumer debt.

What are Buy Now, Pay Later Loans?

BNPL loans are short-term installment loans that allow consumers to purchase an item and space out their payments over time, typically a few weeks or months. Cowley explains that these loans are quick and easy to obtain, with approvals often granted within minutes. They are designed to be frictionless and transparent, allowing users to click a button and immediately see their payment schedule. Initially, these loans were primarily offered for online purchases, but they have since expanded into the physical world through payment cards and are now being offered for more recurring expenses.

Cowley highlights the significant growth of BNPL, noting that roughly half of Americans have used such a loan at some point in the last few years, with 15% to 25% using them regularly. Last year alone, Americans spent approximately $160 billion through these loans, double the amount from two years prior.