Americans have run their credit cards to the limit. Now they’ve turned to buy-now-pay-later plans to buy gas and groceries.
This is yet more evidence that American consumers are broke, stressed, and buried in debt as inflation steals their purchasing power.
Buy-now-pay-later (BNPL) platforms allow users to purchase items by paying several smaller installments (typically around 4) over time.
Block operates the Afterpay BNPL platform. The system was originally set up to provide short-term financing for bigger purchases. But according to company data, usage is expanding into everyday spending categories. The average customer used Afterpay to purchase gas 3.6 times and groceries 2.2 times between Feb. 4 and May 15.
“What we’re seeing with Afterpay on the Cash App card is just everyday spending. We’re really over-indexing toward gas stations and fuel, grocery stores, food,” Block's head of operations, Owen Jennings, said.
Affirm CEO Max Levchin made a similar observation during a CNBC interview last month.
“The single largest category for us is general merchandise — Affirm is truly the everything product at this point.”
Polling by LendingTree mirrors Block’s data.
Nearly a third (29 percent) of BNPL users said they used the service to buy groceries. That was up 14 percent from two years ago. Thirty-eight percent of Gen Z users said they used BNPL for groceries.
More than half of the BNPL users (54 percent) said they wouldn’t be able to make ends meet without the service. That figure rises to 62 percent among parents with children under 18.
BNPL loans are generally interest-free if the installments are paid on time. BNPL providers make their money on interest and late fees when payments are late.
According to the LendingTree survey, 47 percent of BNPL users said they’ve made at least one late payment in the last year. That was up from 34 percent in 2024.
“When nearly half of users say they’ve paid late, it shows how thin many households’ margins are right now,” LendingTree chief consumer finance analyst Matt Schulz said.
Jennings told MarketWatch that some of the increase in BNPL can be attributed to a shift away from traditional credit cards. However, it’s not like American consumers have put away their credit cards.
Consumer debt is at a record level of $5.14 trillion. Revolving debt, primarily reflecting credit card balances, has surged to a record $1.4 trillion.
The data indicates that Americans are using credit cards to make ends meet. For instance, retail sales soared in March, reflecting rising gasoline prices. That same month, revolving debt also surged, growing by 9.1 percent.
BNPL programs provide a credit option for folks who can’t get a credit card or who have run their plastic to the limit. But they come with a dark side. Purchases can quickly pile up. While the payments might be small, multiple loans can easily balloon into big monthly obligations. As MarketWatch explained, “Managing a dozen different repayment schedules across multiple apps can easily cause shoppers to lose track of their obligations, resulting in missed payments and steep late fees.”
The growing use of BNPL platforms might reflect a shift in preference away from credit cards, but the growing number of people borrowing money to make everyday purchases is not a good sign. An economy built on borrowing money to buy everyday goods isn’t sustainable. At some point, credit cards reach their limit. In fact, that may be why some people are turning to BNPL.
While many mainstream analysts claim continued spending demonstrates the “resiliency” of the American consumer, desperate would probably be a better term.
This goes to show that inflation isn’t just some arcane policy topic. It impacts real people, and it is strangling many Americans. Sadly, inflation is the plan, so consumers will have to continue to figure out how to make ends meet as their dollars buy less and less over time.
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