68% May Use More Buy Now, Pay Later Loans as Tariffs Loom

As inflation continues reshaping American spending habits, buy now, pay later (BNPL) services are experiencing unprecedented growth. New survey data reveals these increasingly popular payment options are no longer just for discretionary purchases like Pelotons and iPhones. Rather, more Americans turn to BNPL to cover everything from groceries to rent, and even medical expenses.

Key Takeaways

• More than half of Americans (52%) have used BNPL, with Gen Z leading the charge

• 68% of BNPL users would likely increase their usage if tariffs impact prices

• Rising cost-of-living increases have pushed 31% of BNPL users to use these services more often over the last 6 months

• A single-weekend Coachella pass jumps from $640 (fees included) to $1,068.35 when financed over 36 months at 36.99% APR with BNPL

• Rising costs have led 34% of BNPL users to use the services to cover their rent, mortgage, or utility bills

• 42% of BNPL users have used the service for medical expenses or prescriptions

Young Americans Lead BNPL Adoption

The meteoric rise of Buy Now, Pay Later services has reshaped America's payment landscape, with a remarkable 52% of consumers now having embraced these flexible financing options. And the generational divide in BNPL adoption couldn't be clearer. While 66% of Gen Z reports using these services frequently or occasionally, only 18% of Baby Boomers say the same.

For Gen Z and Millennials, BNPL has become a crucial tool for managing expenses in an increasingly challenging economy. Facing record-high student loan debt (averaging $38,000), unprecedented housing costs (consuming 47% of their income in major cities), and stagnant entry-level wages, these generations are turning to alternative financing methods at rates far exceeding their older counterparts.

As tariffs loom and threaten to drive up consumer prices, 68% of BNPL users say they're likely to increase their usage of these services, including 27% "very likely" and 41% "somewhat likely." Even among those who have never used BNPL before, 43% report they would consider it if tariffs cause significant price increases.

Turning to BNPL for Basic Needs

For younger Americans, many of whom face high-deductible health plans and rising out-of-pocket costs, BNPL has become an increasingly common solution for managing medical expenses. Gen Z (51%) and Gen X (24%) lead all age groups in using these services to finance healthcare costs, a stark contrast to Baby Boomers at just 12%. Overall, 42% of BNPL users say they've used it to make their medical expenses more affordable.

The housing crisis has pushed even more young adults toward BNPL solutions for basic living costs. While 24% of all users report using these services for rent, mortgage, or utilities, the number jumps to 32% among Gen Z and 19% among Millennials. This generational divide becomes even more pronounced in major cities, where younger renters face both higher housing costs and stricter payment deadlines. For many, BNPL serves as a bridge between irregular gig economy income and fixed housing expenses, with 43% of Gen Z users reporting they've used these services specifically to make rent or other housing-related expenses.

Inflation's squeeze on household budgets has transformed BNPL from a convenience into a survival tool, particularly among younger generations, as 31% of users report increased BNPL usage due to rising costs.

The Late Payment Problem

A trend of late payments on BNPL loans reveals what may be a lurking bubble, with younger users struggling most to keep up with installments. Over the past year, 51% of Gen Z users have missed at least one payment, significantly higher than Millennials (41%), Gen X (32%), and Baby Boomers (18%). This trend becomes more troubling when examining frequency: among Gen Z users who paid late, 38% report multiple missed payments, while those earning under $50,000 annually are nearly twice as likely to miss payments as their higher-earning counterparts.

A notable disconnect exists between users' confidence and their actual payment behavior, while 66% report being "very confident" in their ability to make payments, many still struggle to pay on time.

The True Cost of Paying Later

With interest rates as high as 36.99%, BNPL financing can turn everyday expenses into major purchases. The ultra-hip Coachella Valley Music and Arts Festival is at the forefront of culture but could also be a harbinger for what's to come. Including fees, a standard single-week Coachella pass priced at $640 can be relatively affordable with shorter terms and lower rates, costing just $650.69 total over three months at 9.99% APR. However, the same ticket balloons to $1,068.35 when financed over 36 months at 36.99% APR, adding $428.35 in interest charges. Even at mid-range rates around 19.99%, the same ticket costs $856.13 over three years, a 34% premium over the cash price. The difference between choosing a three-month term at 9.99% versus a 36-month term at 36.99% amounts to nearly $418 in additional costs.

The impact becomes even more striking with everyday purchases. A $39.18 Chipotle meal with a three-month term at 9.99% APR adds less than a dollar in interest, but the same meal financed at 36.99% APR over 36 months ultimately costs $65.40, a 67% increase over the cash price. Even seemingly manageable purchases like AirPods Pro 2 ($249) show dramatic variations: at 9.99% APR over three months, they cost just $253.16 total, but at 36.99% APR over 36 months, the final cost reaches $415.66, adding $166.66 in interest charges. The IKEA Kivik Sofa ($1,149) demonstrates how furniture financing choices matter: while a three-month term at 9.99% APR adds only $19.18 in interest, extending to 36 months at 36.99% APR results in a total cost of $1,918.02, with interest charges of $769.02 exceeding two-thirds of the original purchase price. These calculations show how BNPL terms can either offer affordable financing or lead to substantial long-term costs, depending entirely on the payment terms and rates users select.

With the highly anticipated Nintendo Switch 2 launching on June 5 at a starting price of $449, many gamers are surely eyeing BNPL options, and financing costs vary dramatically depending on the terms. At a relatively low rate of 9.99% APR over three months, the console would cost $456.50, adding just $7.50 in interest. However, stretching payments to 36 months at the same rate increases the interest to $72.49, bringing the total to $521.49, resulting in an interest charge nearly 10 times greater.

For users facing higher interest rates, the costs climb significantly. At 19.99% APR, a 36-month term adds $151.63 in interest, pushing the final price to $600.63. At the highest rate of 36.99% APR over 36 months, the $449 console ultimately costs $749.51, with $300.51 in interest charges nearly matching the price of a second console. Even the seemingly manageable 12-month term at 19.99% APR adds $50.09 in interest, making the final cost $499.09.

The Future of Consumer Finance?

As BNPL services expand beyond retail into everyday essentials, the industry stands at a crossroads. Major partnerships like DoorDash and Klarna signal a future where installment payments become normalized for everything from groceries to utility bills. With 68% of current users planning to increase their BNPL usage if tariffs drive prices higher, and younger generations already heavily reliant on these services for basic needs, the trend appears likely to accelerate rather than slow.

However, rising late payment rates and increasing use for essential expenses raise red flags about the sustainability of this financial model. As regulators begin scrutinizing these services more closely and consumers face the true costs of long-term financing, the industry may need to evolve. Whether BNPL represents a genuine innovation in consumer finance or a warning sign of deeper economic struggles could depend largely on how providers balance growth with responsible lending practices, particularly as they expand into essential goods and services.

Methodology

Between April 24 and 25, 2025, CouponBirds surveyed 2,068 U.S. adults, including proportional representation from Baby Boomers, Generation X, Millennials, and Generation Z. The median age for survey participants was 38.7 years.

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