By JJ McCorvey—
NBC News
Buy now, pay later remains a popular way to spend on airline tickets to exotic and far-flung destinations.
But it is also an increasingly common way to acquire food and other basic supplies.
Consumers ages 35 and younger represent 53% of buy now
, pay
later users , but only 35% of traditional credit card holders. , according to LexisNexis Risk Solutions.
Many top borrowers have become so comfortable using these installment loans to purchase out-of-reach luxuries that they are also using them for everyday purchases.
[Credit card debt hits record as late payments also skyrocket]
In 2021 and 2022, clothing and accessories were the most popular product category among millennial (ages 30 to 44) and Generation Z (ages 18 to 29) users, according to supplier Afterpay.
However, last year this category fell to fourth place behind “arts, travel and entertainment,” “home and garden” and “
hardware
,” according to data the company provided to NBC News.
Installment payment options are becoming increasingly popular among Americans.Justine Goode / NBC News;
Getty Images
And “buy now, pay later” services, which allow you to make payments in installments with little or no interest, are seeing rapid growth, to the point of becoming a routine option among young adults, as prices go up.
Younger Afterpay users' spending on many essential products has increased by double and triple digits, with a 465% increase on contact lenses from 2022 to 2023, 182% on garbage bags and 98% on first aid antiseptics.
Spending on lighter fluid, laptop parts, and aids for snoring and sleep apnea exceeded 300%.
Pay for daily groceries in installments
Young people also do the same with competing services.
Benjamín Espinoza, 27, recently restocked his refrigerator thanks to an Instacart promotion and used Klarna to pay his bill of about $40 in installments.
“It's a shame that I have to resort to these media
,” said the video editor from San Antonio, Texas, who lives with three roommates.
Espinoza explained that in 2023 he earned less than $7,000 after graduating in History two years ago.
He acknowledged that most installment payment services don't help consumers build credit, but said, "It's good that we have them, for the moment."
Jasmine Parker, 30, also uses Klarna to do basic shopping while she waits for her check to clear.
She allows him to buy everything she wants, instead of giving up some items, but she assured that she usually pays her entire balance without delays so as not to accumulate debt.
“I don't like owing a lot of money,” said Parker, who works in customer service and lives in the Raleigh-Durham area of North Carolina.
She added that thinking about her student loans stresses her out.
Some TikTok and X social media users have been exchanging layaway purchasing tricks to cope with higher costs.
“Using
afterpay
for groceries is a relief,” one X user posted in December.
“Just buy an e-gift card and send it to yourself.”
According to Afterpay, gift cards and certificates are the second-fastest growing purchases in its arts and entertainment category by millennial and Gen Z customers.
Many borrowers turn to installment payment options to avoid credit cards and their interest rates of 20% or more.
But the fact that younger users choose to pay in installments for more essential items also reflects the growing use of mini-credits in an economy in which many prices have skyrocketed.
Most installment services make money by charging merchants commissions when customers apply for one of their instant loans at checkout.
Afterpay's retail partners include home essentials sellers such as 1-800-Contacts and PetSmart.
In December, rival supplier Affirm announced its expansion into self-checkout checkouts at Walmart's 4,500 U.S. stores, bringing the option closer to shoppers stocking up on essentials.
Installment payment services are also growing rapidly in non-essentials.
Spending on travel tickets increased 1,430% from the previous year among its youngest users, according to Afterpay.
Affirm told NBC News that those purchases are also taking off on its platform: travel and tickets were the fastest-growing category among Generation Z last year and nearly doubled their global volume.
It was also among the fastest-growing purchases for millennials.
Convenience and flexibility: at what price?
A Klarna spokesperson said: “While it is not our place to tell people how or where to shop, we do believe it is our role to offer people choice, convenience and flexibility when paying for everyday things, such as food and groceries. household items".
Some analysts worry that the growth and popularity of installment payment services could spur risky spending.
Researchers at the New York Federal Reserve recently found that customers of these payment options use the services differently, depending on their finances.
Those who have a more precarious situation tend to use them as credit cards “to frequently make medium-sized and off-budget purchases,” they wrote.
More financially stable users turn to these options less regularly, but they do so largely to avoid credit card interest on large purchases.
Deijanae Duncan, 36, said she started using Afterpay for beauty and fashion purchases, and then for cruise tickets.
More recently, she has used it to buy glasses and sports equipment for her three children.
[This credit card company is using artificial intelligence to combat fraud]
“It's not that I was struggling financially,” said Duncan, who lives in Los Angeles and works as a project manager for a federal agency.
“It's been a great way to help me with money management.”
These payment options can be a responsible choice, said Kevin King, vice president of credit risk and marketing strategy at LexisNexis Risk Solutions.
“In many ways, we would prefer that people who are in a difficult economic situation finance essential goods with this, rather than making $400 purchases at Nordstrom,” he said.