Consumers Turn to Financing for Essential Purchases Amid Economic Uncertainty
Economic uncertainty has led more consumers to finance essential purchases such as groceries. A recent survey by Lending Tree indicates a rise in the use of buy now, pay later (BNPL) services for groceries, with an increase from 14% in 2024 to 25% this year.
Many Americans are opting for financing options as concerns about the economy grow. According to Lending Tree data, there is an increase in consumers using BNPL services for groceries, and a significant number are delaying repayments. Of the surveyed shoppers, 41% paid back their loans late, with most settling within a week. Late payments were more prevalent among men, younger individuals, and those with higher incomes.
The popularity of BNPL has surged amidst fears of a potential recession linked to uncertainties like tariffs and interest rates. Consumer sentiment has declined, with a recent index drop from 57 to 52.2. A survey by the Associated Press-NORC Center for Public Affairs Research reported that nearly half of Americans are concerned about a possible recession in the coming months.
Matt Schulz, chief consumer finance analyst at Lending Tree, indicated that BNPL loans are being utilized to extend budgets during times of inflation and economic uncertainty. BNPL services allow users to pay for purchases in installments, appealing to those avoiding credit card risks or interest payments. However, this easy borrowing may lead to overspending and hidden fees.
Initially used by high earners for luxury products, BNPL’s growing popularity now reflects a shift in financial priorities. Schulz noted a change from financing luxury items to groceries and food delivery.
BNPL services, such as those from Afterpay and Klarna, have expanded their consumer base. DoorDash’s recent partnership with Klarna allows for delayed or split payments on food orders. These loan services also remain popular for larger purchases, with 60% of Coachella music festival attendees utilizing payment plans.
The widespread use of BNPL suggests a rising comfort with financial risks, particularly among younger consumers. Economic commentator Kyla Scanlon highlighted the attraction to this risk-taking behavior. Despite the economic climate, consumers see BNPL as less risky, although it does not aid in building credit. Schulz anticipates the popularity of these services to continue growing.
This story was originally featured on Fortune.com.
