JACKSONVILLE, Fla. — While affordability remains top of mind for many Americans, buy now, pay later platforms have become a cushion for shoppers who want what they need without paying the full price upfront.
What started as a modern alternative to credit cards and old-school layaway has exploded in popularity. Platforms like Klarna, Afterpay, and Affirm promise flexible installment plans, often marketed as interest-free, and quick approvals that don’t always require a traditional credit history.
According to the Consumer Financial Protection Bureau, more than 330 million buy now, pay later loans were created in 2023 using data from six large lenders. That’s a sharp increase from just over 19 million loans in 2019.
The loans are easy to access and easy to stack.
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Installment plans can now be used for just about anything, like appliances, plane tickets, groceries, and even fast food. With a small down payment, shoppers can split purchases into several smaller payments over time.
In the best-case scenario, it works exactly as intended.
“It can help you with a purchase that you want to be able to do and be able to spread the payment over time to be able to make it fit within your budget,” said Melissa Thomas, Chief Operating Officer at Community First Credit Union.
But Thomas warns the convenience comes with risk.
Consumers can sign up for multiple plans across multiple apps, making it difficult to track what they owe. The practice, often referred to as “debt stacking,” can quickly spiral, especially for younger consumers who are more likely to use the platforms.
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Reporting from Bankrate shows Gen Z and Millennials are the most frequent users of buy now, pay later services. Nearly half of users report experiencing at least one issue, most commonly overspending and late fees.
And while many of the loans are marketed as interest-free, that can change if a payment is missed.
“There are some that are interest-free; however, if you don’t make the payment, it could not be interest-free, and there could be late payments that they’re not aware of,” Thomas said. “If they have signed up for multiple ones and then can’t afford it and do not make the payment, then there could be fees that are attached to it.”
Late fees can add up quickly. And while most buy now, pay later lenders don’t routinely report on-time payments to credit bureaus, the CFPB warns that unpaid debt sent to collections could still damage a consumer’s credit score.
The rapid growth of the industry has also caught the attention of state leaders. Last December, seven attorneys general launched an inquiry into major buy now, pay later lenders, questioning whether their practices comply with consumer protection laws.
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In Florida, former Chief Financial Officer Jimmy Patronis issued a consumer alert warning about unregulated lending products and rising household debt. While Florida regulates many types of consumer loans, buy now, pay later platforms are not specifically included under the state’s Consumer Finance Act. Georgia has not enacted targeted regulations either.
Thomas says for consumers who feel overwhelmed or who want to avoid the risk altogether, there are alternatives.
“With a credit card or loan, when you’re making that monthly payment, and you’re paying it on time, it’s going to show on your credit report,” she said. “You know what the interest rates are, you know what the fees are, they’re just very clear.”
She also encourages consumers to consider short-term savings plans instead of relying on installment loans.
“It doesn’t always have to be a loan,” Thomas said. “We can really work with the member to help them to have a short-term savings plan so that they don’t have to use credit.”
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