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More than 78 million Americans used Buy Now and Pay Later, and Buy Now in the past year.
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Nearly 78M Americans Utilized Buy Now or Pay Later in Past Year
NERDWALLET 2022 PERSONAL LOANS REPORT
Written by Elizabeth Renter Senior Writer/Spokesperson | Data analysis, Personal finance, Economic analysis Elizabeth Renter spends her time searching for consumer insights from data sets and crunching numbers for all things personal finance. Her work has been cited as a result by The New York Times, The Washington Post, the "Today" show, CNBC and elsewhere. In the past, prior to her joining NerdWallet as of the year 2014, she was a freelance journalist. When she isn't engaging in math and words, Elizabeth enjoys traveling, lifting weights, and renovating the beauty of her Victorian home. She lives in Clay Center, Kansas.
October 11, 2022
Written by Kim Lowe Lead Assigning Editor Consumer lending Kim Lowe leads the personal loans editorial team. Kim Lowe came to NerdWallet after 15 years in charge of the content on MSN.com, including food, health, and travel. Kim began her career as a writer for magazines which covered mortgage as well as the restaurant, supermarket and mortgage industries. Kim received a bachelor's degree in journalism at The University of Iowa and a Master of Business Administration from the University of Washington.
A majority of the products featured here come from our partners, who we pay. This impacts the types of products we review and where and how the product appears on the page. But, it doesn't affect our assessments. Our opinions are entirely our own. Here is a list of and .
When your car breaks down or your utility bill increases, you find room in your budget to cover these expenses. And when the cash doesn't be available, you might have to resort to other, sometimes more costly options.
While 50% of Americans are likely to use credit card to cover bills and pay for other household expenses in tough economic times if they didn't have cash available Some would resort to newer, nontraditional sources, according to a NerdWallet research of 2,065 U.S. adults conducted Aug. 4-8 online by The Harris Poll.
According to the study, 14% will most likely utilize "buy now, pay later" services, and 11% would use mobile cash advance apps to pay off bills and other household expenses in tough economic times.
"Buy now and pay later" isn't just for clothing and shoes. Customers use these services to cover things like gas, groceries and health care costs," says Annie Millerbernd, NerdWallet's authority on personal loans. "They appear to be an easy option to cover the essentials if you're short on cash, but problems occur when you're unable to make the payment in time."
In the last year many thousands of Americans have embraced these relatively new financial tools and the smallest of adults tend to lead the charge in the study.
Editor's note: All through the report, in discussing the sources of funding Americans would most likely use during tough economic times in the future, we're referring to sources they'd most likely utilize to pay for bills and cover other household expenses in the event they didn't have money on hand to cover them.
The key results
Credit cards are a mainstay, but buy now, pay later can also be an option in difficult financial times. The majority of Americans (50%) are likely to utilize credit cards to pay payments and other household expenses during tough economic times in the event that they did not have cash in their wallets. Some would opt for newer funding types 14% are most likely to use buy now or pay later options, and 11% would use mobile cash advance apps for charges and other expenses during such times, as per the survey.
Millions have used buy now and pay later services in the last year. More than 78 % of Americans (30 percent) have used the buy now, pay later in the last twelve months, the study revealed. In the survey, they've used it six times on average.
Apps for mobile cash advances can provide millions of Americans money fast. Roughly 49.2 million Americans (19 percent) have utilized apps for cash advances on mobile devices in the past twelve months. Like BNPL, these apps are particularly popular among younger generations: 38 percent of Generation Z (ages 18-25) and 39 percent of the millennials (ages between 26 and 41) have used them over the last year, as opposed to 11 percent from Gen X (ages 42-57) and 2percent of baby boomers (ages 58-76) According to the study.
More Americans are using BNPL more than personal loans. In the past twelve months, 24% of Americans, or 62 million took out at minimum one personal loan and borrowed $5,046, or more during the timeframe, the survey found.
Where Americans can turn in difficult times
The majority of Americans (50 percent) are most likely to use credit cards for bills and other household expenses if they didn't have enough cash on hand to pay for them during tough economic times, like a recession, job loss or unexpected expenses. Credit cards were the most often mentioned financial source according to the survey.
The majority, or 43 percent of Americans are likely to use their emergency savings to cover the costs during these times according to the study. Saving money like this takes time and space in your budget to allow it to happen. Understandably, not everyone has these savings.
A chart that shows how all generations responded to the poll, .
"There are a variety of borrowing options for people when they are limited, but credit cards as well as personal loans aren't without their own strict borrowing requirements," Millerbernd says. "Buy now or pay later, and cash advances are much easier to get, but they could cause people to overextend themselves."
Pay later, buy now is once again wildly popular
Around 77.7 millions Americans have utilized the internet in the last 12 months, according to the survey. This accounts for 30% of Americans, down slightly from 37% in the survey we conducted in September 2021.
It's been used frequently around six times during the past 12 months, on average.
Pay later and buy now is an installment loan which is paid at the point of purchase, be it at the cash register or on the internet. This type of service can make it easy to spend more than you normally will because you're only paying part of the bill at the point of purchase. They also are accompanied by potential fees that are significant, especially in the event of a late payment. Because the loans generally do not require a background check for credit, they may be attractive to those with poor credit scores and aren't eligible for other forms of credit.
Half of Gen Z and millennials (50%) and 44 percent from Gen Z have used BNPL in the last 12 months, according to the study. That's compared with 25% of Gen X and 14% of baby boomers.
49.2M turn to mobile cash advance apps over the last year
About 49.2 million Americans (19 percent) have used a smartphone in the last 12 months, as per the survey.
Mobile cash advance apps, also known as paycheck advance applications, basically loan you money from your coming pay check. These loans are limited, usually of several hundred dollars and many of them have subscription or other fees included. While they could be a quick source of cash when expenses arise and you can't tap other sources of cash, they can be costly if you consider the amount you can borrow.
Like BNPL and mobile cash advances, mobile cash advance use is more prevalent among younger generations. For instance, 38% of Gen Z, three-quarters of the millennials, 11 percent of Gen X and 2% of baby boomers have utilized these apps over the last year.
Furthermore they are more likely to be used by people who earn less -26% of people who have a household income of less than $50,000 and 22% with an income between $50,000 and $74,999 have utilized these apps over the last 12 months, while 15% of those with household incomes of $100k or higher.
Personal loans are a source of financing that accounts for one quarter of Americans
Personal loans are a long-standing source of funds, whether for consolidating debt or to purchase new products. The repayments are set and interest rates can be very low for borrowers who are qualified. However, the proportion of Americans using personal loans is less than that of those who use BNPL services, and the two financing sources can be able to be utilized for similar goals.
In the last 12 months, around 60 million Americans (24%) have taken out at minimum one personal loan in comparison to 29 .
In the average, they received $5,046. The majority of the borrowers borrowed $5,000 or more during that one-year timeframe.
Time horizon: One way to select your money source
Ideally, when you wish or need to purchase something, you can purchase it in full with cash or a debit or credit card that you are able to pay in full prior to the due date. However, unexpected expenses and challenging financial situations can occur and, sometimes, big purchases aren't able to fit within your budget.
Although all of these sources will require you to pay the amount back in a certain time, thinking about how long you'll have to pay off the expense will help you in picking the right option.
Short-term funding
If you require money fast but only for a limited period, consider the following options. The expenses related to these options -- which include fees and interest are high, which is why you'll need to commit to the quick payment and make use of them for necessities and not for needs.
Cash advance mobile apps are useful in the event of an emergency, or in the absence of an emergency account. These tools may be appropriate to cover a gap in your income or pay for a utility bill that's due within a few days of your next paycheck, for example. Be aware that they could make it easier to continue borrowing.
Credit credit cards: Credit cards can be an an excellent way to cover costs, as long as you can pay the balance before the due date. Fail to do this, and interest charges can quickly accumulate.
Long-term financing
Debt consolidation and unexpected large expenses -- like the home appliance that fails or car repairs -- could not take years to pay off, but certainly longer than a couple of weeks.
0% APR credit card If you are eligible for credit cards that offer one year or more of free credit. They can be especially useful for transferring high-interest credit card debt or for unexpected large expenses. Make sure you pay the amount in full before the interest-free period is over, or you'll be charged the interest you accrued in that time also.
Pay now, buy later: Terms vary by BNPL company, but some might offer terms that run for a few months or years. The downside is that most do not report timely payments to credit reporting agencies, so they won't help to build credit.
Sources of funding for the longer term
Options that let you pay off a loan or line of credit over a longer period of time may be able to meet credit criteria which short-term alternatives don't. However, one benefit is the money will not "cost" you as much , since fees and interest are typically lower.
Personal loan: Personal loans could have a higher bar for qualification, but they could be a source of significant amounts repaid over a long term. When available through traditional credit unions and banks, you may qualify for the lowest rate when you're an existing account owner.
401(k) loan: These loans , because you're borrowing against your savings, and in the event the job you're working in is terminated and can't pay it back then your loan could be subject to penalties and taxed as a withdrawal. However, interest rates may be attractive and loan amounts are generous, and they do not require a credit screening.
Home equity line of credit or cash-out refinances: Homeowners may use additional funding sources through tapping into the equity of their homes. This type of financing can have low interest costs but like mortgages, it can put your home in danger if you fail to pay.
"Emerging financing options like BNPL and cash advance apps throw a wrench in the traditional collection of financing options" Millerbernd says. "The crucial factor to successfully borrowing money is to know how you'll repay it prior to the due date."
METHODOLOGY
This online survey took place in the U.S. by The Harris Poll on behalf of NerdWallet beginning in August. 4 to 8, 2022 with 2,065 U.S. adults ages 18 and older. The sampling precision of Harris online polls is assessed by using a Bayesian credible interval. In this case, the sample data is accurate by +/- 2.8 percentage points using a 95% confidence level. For more information on the survey's methodology including weighting variables as well as subgroup sample sizes, please contact Alikay Wood at
Calculations that determine how many Americans have utilized personal loans Buy nowand pay later; and mobile cash advance applications based on 2021 population estimates from the U.S. census.
The survey question about the sources of funding used during tough economic times was formulated as "Which one of these sources are your most likely sources to use to pay for bills or other household expenses in tough economic times (e.g., a recession, job loss, unexpected expenses) in the event that you were not able to have money on hand to cover them? Please select all that apply."
Disclaimer
NerdWallet does not make, either expressly or impliedly, all representations and warranties of any kind, including quality and suitability for a specific purpose or whether the information provided in the article is reliable, accurate or free of mistakes. The use or reliance you place on this information is entirely at your own risk and its completeness and accuracy are not warranted. The information in this article should not be relied upon or linked with the performance in the future of NerdWallet or any of its subsidiaries or affiliates. Any statements that do not reflect actual facts are forward-looking statements that are subject to risks and uncertainties as indicated by words such as "believes," "expects," "estimates," "may," "will," "should" or "anticipates" or similar phrases. These forward-looking statements could materially differ from the way NerdWallet presents information to analysts and its actual financial and operational results.
About the author: Elizabeth Renter's role as an experienced senior writer and data analyst at NerdWallet has been quoted by The New York Times, The Washington Post, CNBC and elsewhere.
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