Growing up, most of us have probably heard of layaway plans, in which a consumer places a deposit on items like clothing or large appliances to “lay it away” for later pickup when they come back and pay the balance. It seems the method has gone through a bit of a digital rebrand and returned with a vengeance in the era of online shopping, particularly because of inflating costs. According to a new survey from Credit Karma. buy-now-pay-later (BNPL) is being used for everything from beauty services to gas.
The survey found that 60% of consumers use BNPL to pay for purchases, with more than half of respondents who used BNPL say their usage has gone up in the past six months.
This is particularly concerning since reports found that BNPL could easily lead to a debt spiral if customers aren’t careful. CNBC points out that popular BNPL companies like Affirm sweeten lending deals that credit cards and traditional installment plans don’t — they sometimes include no late fees, low or no interest, high loan limits and no credit checks required. But this could lead to significant financial disrepair if consumers aren’t reading terms and conditions closely.
Credit Karma’s insights also delved into how people are dealing with the consequences of utilizing BNPL–for example 22% of survey respondents reported using credit cards to cover their BNPL purchases.
The report also breaks down where people are leaning on BNPL the most– Department stores (40%), e-commerce stores (31%), warehouse stores (18%), supermarkets (13%).