Buy Now, Pay Later Business is Booming – Here’s Why
Over the past five years, inflation has imposed a significant toll on the American consumer. In February 2021, the Consumer Price Index (CPI) reported inflation at just 1.7%. 16 months later, in June 2022, inflation had surged to a 42-year high of 9%.
Today, the CPI reports inflation at 3.5%. “Core” CPI, which strips out the more volatile and seasonal food and energy prices, is even lower at 2.6%. Both, however, are still above the Federal Reserve’s target rate of just 2%.
Rising prices have forced many Americans to become more disciplined – and creative – in how they spend their money. One of the more popular tools in this endeavor has been the use of Buy Now, Pay Later (BNPL).
BNPL is a short-term financing option that allows consumers to make point-of-sale installment loans for purchases. BNPL providers offer short-term fixed loans with low- or no-interest financing. Payment provider Klarna is accepted at nearly 800,000 merchants worldwide, including major retailers such as Amazon, Walmart, Target and Best Buy. Affirm, PayPal, Apple Pay and Afterpay are other popular BNPL providers.
For example, if you make a $100 purchase using BNPL at a participating retailer, you’ll immediately pay 25% ($25) as a down payment. Payments to BNPL providers can be linked to your bank account. The remaining $75 will be paid off in $25 increments every two weeks, or in some cases monthly, until the total $100 purchase price is paid in full. As long as you make your payments on time, you are not charged any interest. However, if you are late or miss a payment date, you are subject to late charges and interest payments.
BNPL has allowed inflation-weary consumers to avoid using their high-interest credit cards on many of their purchases. According to LendingTree, the average interest rate charged to consumer credit cards is 20.94%. To help cope with the rising cost of consumer prices, Americans have embraced credit cards at an alarming pace. The Federal Reserve Bank of New York notes there are currently 648 million open credit card accounts. Americans collectively hold $1.25 trillion in credit card debt. Over the past five years, household credit card debt has risen 62.6%.
The use of BNPL has soared in recent years. In 2025, eMarketer reports that 91.5 million Americans used BNPL. That’s up 86% since 2021. The Federal Reserve Bank of Richmond estimates total BNPL transaction volume in 2025 was $70 billion. This year, BNPL transaction volume is expected to jump nearly 83% to $127.9 billion.
But consumers aren’t just using BNPL as a way to finance more expensive purchases such as vacations, electronics or home appliances. They are increasingly using it to purchase basic necessities like groceries, rent, medical bills and utility bills. In a 2026 survey by LendingTree, more than half (54%) say they need BNPL loans just to make ends meet.
Credit cards still remain the most popular form of payment in the U.S. In 2025, 42% of all purchases made by U.S. consumers were with credit cards followed by debit cards at 33%, according to eMarketer. But BNPL has increasingly become a popular option for consumers still navigating high inflation and high interest rates.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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