Consumers using more buy now, pay later apps, cutting back non-essentials as basic living costs soar

Cyber Monday buy now, pay later (BNPL) app usage hit $9.4 million this year, up 42.5%. (iStock)

Consumers have moderated their spending in recent years as inflation takes hold, and the economy slowly recovers from the COVID-19 pandemic. While they’ve cut back on certain non-essentials, it is also clear that Americans are turning to alternative payment methods like buy now, pay later (BNPL) apps to make ends meet.

The end of last year saw the largest use of buy now, pay later (BNPL) apps on record, according to an Adobe Analytics report. Cyber Monday alone saw $940 million in purchases using BNPL apps. That’s up 42.5% year-over-year.

Consumers are also using BNPL options to pay for larger orders. The number of items in the average shopper’s cart rose by 11%, according to Adobe.

Consumers cover some necessities with BNPL apps, indicating an increased need to use these apps for everyday expenses. About 29% of users bought appliances and 32% bought furniture, according to C + R Research. The most common purchases, however, were clothing and electronics.

Instead of defaulting to BNPL apps, a low-interest personal loan can help you make payments more manageable. Credible can show you several personal loan lenders that offer quick loans. Head to Credible to compare rates and lenders and find a timeline that works for you.

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BNPL users experience more financial distress than non-users

BNPL apps are popular among different types of spenders and multiple credit profiles. Many BNPL users have lower credit scores than non-users, a Consumer Financial Protection Bureau (CFPB) study found. Frequent BNPL borrowers have scores ranging from 580 to 669, while non-uses are in the good category, ranging from 670 to 739.

“A common misconception of buy now, pay later borrowers is that they lack access to other forms of credit,” CFPB Director Rohit Chopra said in a press release. “Our analysis shows that these borrowers are more likely to use other credit products.”

Nearly 95% of BNPL users had at least one credit record in another account, compared to 86% of non-borrowers, according to the CFPB study. 

Buy now, pay later apps may be helpful options come checkout, but they aren’t always the best financial move.

The CFPB report shows that borrowers who use BNPL options at checkout have higher levels of financial distress than non-users. This is likely due to higher credit utilization ratios on both BNPL apps and other forms of credit, the CFPB cites.

Combining your high-interest debt into one manageable loan can help you get out of debt faster and avoid the need to use a costly payment option. Visit Credible to help compare debt consolidation options and find the best personal loan rates for you, based on your credit score and credit history.

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Consumers are cutting back on streaming services, prioritizing necessities

Despite high buy now, pay later usage among Americans, there are some costs consumers aren’t willing to pay for as the cost of living rises.

Streaming services are one of the non-essentials that consumers are evaluating. TiVo research shows that the average number of streaming services Americans use decreased from 11.6 in the fourth quarter of 2022 to 10.9 in the second quarter of 2023. This resulted in an average monthly payment of $170, down from $189 in 2022.

Certain generations are also cutting back on necessities. About 75% of Gen Zers changed their spending habits in 2023 to accommodate rising costs due to inflation, a recent Bank of America study stated. Gen Z is now spending less on items such as groceries and gas.

The younger generation plans to continue limiting their spending on necessities and non-necessities alike. Nearly all respondents in Bank of America’s survey planned to maintain their cutbacks through 2024.

If you need help paying for an emergency or basic needs, a low-interest personal loan can help ensure you don’t break the bank. When it comes to personal loan shopping, Credible can do the heavy lifting for you. With the click of a button, you can view multiple lenders, rates and terms in one spot. Get a jump start on your personal loan shopping today.

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