More people are buying now, paying later — even for groceries

Between an upfront payment of $120 or four separate smaller payments of $30, which one would you prefer? For almost half of all Americans, it’s easily the latter.

Buy now, pay later services like Klarna and Afterpay have become increasingly popular in recent years, acting as microloans for many online purchases. The reasons for their popularity are apparent: You get the instant gratification of buying and receiving a product at a slashed upfront cost, without having to pay interest fees upon repayment. And unlike traditional loans, you generally don’t need to pass a hard credit check to qualify for BNPL, per the Consumer Financial Protection Bureau.

With prices rising across the board, the option of smaller delayed payments are attractive for many consumers, whether they’re college students or adults working a 9-to-5. The majority of BNPL users take out loans to buy wants — not needs — like electronics and accessories. And that’s part of why the microloans are so appealing.

“I use [BNPL] to make stupid purchases that I can’t resist,” Andréa Becker, an assistant sociology professor at Hunter College, told Salon. “It feels spiritually better and fiscally more responsible to pay $20 every two weeks than $80 all at once for skincare.”

Alyse Stauffer, an NYU undergraduate student, agreed. “When I want something, 95% of the time I usually can't afford it because I need to save my money for things like prescriptions, food, whatever. So when I see something that makes me go, ‘I really, really want this,’ I use [BNPL].”

Stauffer said putting personal purchases on her credit card feels more irresponsible, compared to putting them on her BNPL account, which is linked to her debit card. BNPL services also allow her to delay payments if she can’t make it, which is a relief compared to strict credit card minimum payments.

It’s this convenience that draws so many to the service, James Mohs, an associate professor of accounting and taxation at the University of New Haven, said. It’s the same reason why BNPL exploded in popularity at Coachella in April, according to Forbes, with around 60% of general admission tickets being financed by BNPL plans.

“It does give you the sense that this is a layaway-type thing,” Mohs said, referencing an older practice wherein a seller holds an item for a customer and hands it over after the balance is fully paid. “But this is not even close to that. If you're not diligent, your balance is just going to grow and grow and grow, because even though you're getting the goods, you still owe on the other side.”

The biggest worry, Mohs said, is getting trapped in a debt cycle. While most BNPL purchases are luxuries, an increasing number of buyers are taking out microloans for necessities like groceries. According to a survey from LendingTree, an online lending marketplace, the percentage of BNPL users who use the service to buy groceries has grown from 14% last year to 25%.

“That can get them in a huge hole, a huge hole,” Mohs emphasized, referring to buyers who use BNPL to purchase staples. “And you know what? You get into a deep crevice like that, and sometimes you can’t get out of it.”

Almost half of BNPL users regret making a purchase with the service, the survey reported. Even though there are no interest loans on repayment, there are still hidden caveats. For example, if you want to return an item that you bought with BNPL, chances are you’ll have to pay off that loan in full before you can return it. Additionally, failing to repay a BNPL loan on time can ding your credit score, while timely repayments do not contribute to your score.

That’s not to say BNPL services are inherently predatory. Like a credit card, its pros can outweigh the cons — but only if used right.

“If you're going to use them, don't run up big balances. Pay them off,” Mohs said. “And if it feels too good to be true, that’s because it is. Sooner or later, you’ve got to pay the piper.”