When the economy was flush with pandemic-era stimulus cash, the “buy now, pay later” experience – which allows consumers to split their payments for a purchase over several installments – took off like a summer pop single. 

Consumers and investors alike took to the idea as the next big thing in online shopping, which in many cases bypasses qualifying factors such as credit score. However, not all first impressions tell the whole story. And as the potential for recession looms on the horizon, will the “buy now, pay later” system still hold sway? 

CivicScience data show that “buy now, pay later” usage among U.S. adults has increased from 17% in Q4 2021 to 21% in Q2 2022 (quarter to date). And those who have used the option over-index in reporting they are in a financially better place than they were before the pandemic. 

This suggests that quick adoption has been primarily among those who have had the cash available to fulfill all of their payments. However, as this Wall Street Journal article explains, delinquencies with pay-over-time users have spiked, leading to rising concerns within the industry. Survey results also show that roughly a quarter of those who have used or intend to use these payment plans report being worse off financially.

Close to a third of adopters feel uncomfortable with the amount of debt they have and earn less than $35K annually. However, those who intend to use a “buy now, pay later” service in the future are the most uncomfortable with their level of debt and earn the least amount of money per year.

Intenders are also the most likely to feel that the economy will stay the same over the next six months. So while this demographic may be on less-stable footing when it comes to fulfilling payment installments, they are optimistic that the economy wouldn’t impact their ability to do so.

Despite the optimism, the percentage of people who do not feel “very” or “somewhat” comfortable with their debt is increasing. This rise, even without the onset of a recession, does give some viable cause for concern. 

Ultimately, while these payment plans continue to attract sizable interest, the fact that this interest is coming from low income earners and those already flirting with uncomfortable amounts of debt poses the question: will “buy now, pay later” users default on their payments in the event of an economic downturn? The answer is yet to be seen.