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Buy Now, Pay Later Services Grow as an Alternative to Credit Cards

“Buy now, pay later” (BNPL) options are growing in popularity for larger purchases.

Retailers, such as Walmart, are seeing a year-round boost from this purchasing option and are doing away with traditional layaway programs, reported CNBC (Sept. 25). RBC Capital Markets even estimates a BNPL option increases retail conversion rates 20% to 30%, and lifts the average ticket size between 30% and 50%.

BNPL plans are offered by companies lie Affirm, Afterpay, and Klarna. While each plan has its differences, such as the number of payments, they all offer interest-free payment options spread out over a short period of time, with no hidden fees.

The Food Institute took a closer look into why these services are becoming so popular with consumers.


The types of installment payments that BNPL services offer are particularly popular among young consumers that either don’t have access to credit or don’t want to use credit cards for purchases.

Another driver is uncertainty around employment and finances, according to Andrew Latham, a certified personal finance counselor and managing editor at Supermoney.com.

“People are more interested than ever in spreading out the cost of purchases,” said Latham. “Even people with substantial incomes and assets are increasingly looking for ways to finance purchases without paying fees.”

Latham noted that its part of the “subscription lifestyle’ so many consumers are embracing these days. “You pay for your streaming services, meals, books, music, and curated wardrobes in convenient monthly subscriptions; why not do the same with other purchases also,” he said.

Additionally, Latham added that another reason BNPL is so popular is because it makes it easy to finance purchases without applying for a credit card or traditional installment loans.

“BNLP plans are much more accessible and less risky and intrusive than a store-brand credit card, which have massive fees associated with late payments,” added Jonathan Treiber, co-founder and CEO of RevTrax, a promotions marketing platform. “So, we find that consumers often rush into BNPL plans at checkout as they’re looking for the instant gratification of a new purchase.”


At the same time BNPL services are growing, so is credit card debt. Fifty-nine percent of Americans say they are currently carrying more credit card debt than they were at the beginning of the pandemic, reported Reuters (Sept. 27).

The Federal Reserve Bank of New York’s “Quarterly Report on Household Debt and Credit” found that the amount of purchases paid for with credit cards rose $17 billion in the second quarter, marking the first time that figure went up after four straight quarter of declines.