Nearly 78M Americans Used Buy Now, Pay Later in Past Year

When your car breaks down or your utility bill skyrockets, you find room in your budget to cover these expenses. And when the cash doesn’t exist, you may turn to other, sometimes more costly options.

While 50% of Americans would most likely use credit cards to pay bills and cover other household expenses during tough economic times if they didn't have cash on hand, others would turn to newer, nontraditional sources, according to a NerdWallet survey of 2,065 U.S. adults conducted Aug. 4-8 online by The Harris Poll.

According to the survey, 14% would most likely use “buy now, pay later” services and 11% would turn to mobile cash advance apps to pay bills and cover other household expenses during tough economic times.

“Buy now, pay later isn’t just for clothes and shoes. People use these services for needs like groceries, gas and health care expenses,” says Annie Millerbernd, NerdWallet’s authority on personal loans. “They seem like an easy way to cover essentials when you don’t have cash, but problems occur when you can’t actually pay later.”

Within the past year, millions of Americans have turned to these relatively new financial tools, and the youngest adults are often leading the charge, according to the survey.

Editor’s note: Throughout the report, when discussing what funding sources Americans would most likely use during tough economic times, we are referring to sources they’d most likely use to pay bills and cover other household expenses in the event they didn’t have cash on hand to cover them.

Key findings

• Credit cards are a mainstay, but buy now, pay later is also a source during trying financial times. Half of Americans (50%) would be most likely to use credit cards for bills and other household expenses during tough economic times if they didn’t have cash on hand. Some would opt for newer funding types: 14% would be most likely to use buy now, pay later and 11% would use mobile cash advance apps for bills and expenses during such times, according to the survey.

• Millions have used buy now, pay later in the past year. Nearly 78 million Americans (30%) have used buy now, pay later services within the past 12 months, the survey found. Among them, they’ve used it six times, on average.

• Mobile cash advance apps offer millions of Americans money fast. Roughly 49.2 million Americans (19%) have used mobile cash advance apps in the past 12 months. Like BNPL, these apps are most popular among younger generations: 38% of Generation Z (ages 18-25) and 39% of millennials (ages 26-41) have used them in the past year, versus 11% of Generation X (ages 42-57) and 2% of baby boomers (ages 58-76), according to the survey.

• More Americans use BNPL than personal loans. In the past 12 months, 24% of Americans, or 62 million, have taken out at least one personal loan, borrowing $5,046, on average, during that period, the survey found.

Where Americans turn in tough times

Half of Americans (50%) would be most likely to use credit cards for bills and other household expenses if they didn’t have cash to cover them during tough economic times, such as a recession, job loss or unexpected expenses. Credit cards were the most commonly cited financial source, according to the survey.

Fewer, 43% of Americans, would turn to their emergency savings to cover such expenses during those times, the survey found. Setting aside a fund like this takes time and enough room in your budget to make it happen. Understandably, not everyone has such savings available.

For a chart illustrating how all generations responded to the survey, click here.

“There are plenty of borrowing options when money is tight, but credit cards and personal loans can have tough borrowing requirements,” Millerbernd says. “Buy now, pay later and cash advances are much easier to qualify for but could lead people to overextend themselves.”

Buy now, pay later is overwhelmingly popular again

About 77.7 million Americans have used buy now, pay later within the past 12 months, according to the survey. This accounts for 30% of Americans, down slightly from 37% when we asked in September 2021.

And they’ve used it frequently — about six times during the past 12 months, on average.

Buy now, pay later is an installment loan made at the point of purchase, whether that’s the cash register or online. These services can make it easy to spend more than you typically would since you’re paying only part of the bill at checkout, and they come with the risk of potentially significant fees, particularly if you miss a payment. Because the loans typically don’t require a hard credit check, they may appeal to people who have low credit scores and otherwise wouldn’t qualify for other types of credit.

Half of millennials (50%) and 44% of Gen Z have used BNPL during the past 12 months, according to the survey. That’s compared with 25% of Gen X and 14% of baby boomers.

49.2M turn to mobile cash advance apps in the past year

About 49.2 million Americans (19%) have used a mobile cash advance app within the past 12 months, according to the survey.

Mobile cash advance apps, also known as paycheck advance apps, essentially loan you money from an upcoming paycheck. These loans have limits, generally up to a few hundred dollars, and many of them have subscription or other fees built in. While they may be a source of fast cash when expenses arise and you can’t tap other sources, they can be expensive considering the amount borrowed.

As with BNPL, mobile cash advance use is more common with younger generations: 38% of Gen Z, 39% of millennials, 11% of Gen X and 2% of baby boomers have used these apps in the past year.

Also, these apps are more likely to be used by those with lower incomes — 26% of those with a household income below $50,000 and 22% of those with a household income of $50,000-$74,999 have used them in the past 12 months, compared with 15% of those with household incomes of $100,000 or more.

Personal loans are a funding source for one-quarter of Americans

Personal loans are a long-standing source of money, whether for consolidating debt or purchasing new items. The payments are fixed and interest rates can be low for well-qualified borrowers. But the share of Americans using personal loans is currently lower than those using BNPL services, and the two funding sources could, in some cases, be used for the same purposes.

Within the past 12 months, about 62 million Americans (24%) have taken out at least one personal loan, down slightly from 29% when we asked in 2021.

On average, these borrowers took out $5,046. A full 28% of borrowers took out $5,000 or more during that one-year period.

Time horizon: One way to choose your money source

Ideally, when you want or need to purchase something, you can do so outright with available cash, a debit card or a credit card you can pay in full before each due date. But unexpected expenses and trying financial times can arise, and sometimes large purchases don’t fit neatly within a budget.

Though all of these sources require you to pay them back at some point, thinking about how long you’ll have to pay off the expense is a starting point for choosing the right source.

Short-term funding

If you need money quickly and only for a short period, consider the following options. The costs associated with these — including interest and/or fees — can be high, so you’ll need to commit to a quick payoff and ideally use them for needs, not wants.

Mobile cash advance apps: Use in case of an emergency, or in the absence of an emergency fund. These tools may be appropriate to bridge an income gap or cover a utility bill that’s due a few days before your paycheck, for example. But be careful: They can make it easy to keep borrowing.

Credit cards: Credit cards are an excellent way to cover costs, as long as you can pay off the entire balance by the monthly due date. Fail to do this, and interest charges will stack up quickly.

Medium-term funding

Debt consolidation and unexpected large expenses — like a home appliance that quits or car repairs — may not require years to pay off, but certainly more than a few weeks.

0% APR credit card: If you qualify, some credit cards offer a year or more of interest-free credit. They can be particularly useful for transferring high-interest credit card debt, or for large unexpected expenses. Be sure to pay the balance before the interest-free period ends, or you’ll owe interest accrued during that time, too.

Buy now, pay later: Terms vary by BNPL company, but some may offer terms that last a few months or years. One downside: Most don’t report on-time payments to credit reporting agencies, so they won’t help build your credit.

Longer-term funding sources

Sources that allow you to pay off a loan or line of credit over a longer period may have credit qualifications that short-term options don’t. However, one benefit is the money won’t “cost” you as much — interest and fees are generally lower.

Personal loan: Personal loans may have a high bar for qualification, but they can be a source of significant amounts repaid over a long term. When available through traditional banks and credit unions, you may qualify for a lower rate if you’re an existing account holder.

401(k) loan: These loans can be risky, because you’re borrowing against your nest egg, and if you lose your job and can’t pay it back, your loan could be penalized and taxed as a withdrawal. However, interest rates can be favorable and loan amounts generous, and they don’t require a credit check.

Home equity line of credit or cash-out refinance: Homeowners can use additional funding sources by tapping the equity in their homes. This type of financing can have low interest costs but like a mortgage, it can also put your home in jeopardy if you default.

“Emerging financing options like BNPL and cash advance apps are throwing a wrench into the traditional set of financing options,” Millerbernd says. "The key to successfully borrowing money is to know how you'll repay it ahead of time."