A Third of Buy Now, Pay Later Users Miss Payments

Missed BNPL payments take a toll on credit scores, a study showed

Woman using credit card for online holiday shopping

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Buy now, pay later has grown in popularity, but more than a third of users are behind on the “pay later” part, which is hurting their credit scores, according to a new study.

Of 1,044 Americans surveyed in August by Qualtrics on behalf of Credit Karma, a personal finance company,  44% have used buy now, pay later options to purchase an item using a number of affordable interest-free monthly payments. Of those, 34% have fallen behind on one or more payments, data showed.

Key Takeaways

  • More than a third of people who purchase products under "buy now, pay later" plans fall behind on payments, a study found. 
  • Missing payments hurts your credit score, but making timely payments doesn't help.
  • With old-fashioned layaway plans, your credit wasn’t hurt if you didn’t pay the balance, but you had to pay it off before taking the product home.

During the pandemic, when most people were stuck at home following shelter-in-place orders, e-commerce boomed. Initially, fitness fanatics used BNPL to buy expensive exercise equipment so they could work out at home. The ease and affordability of BNPL helped spark a buying spree for everything from furniture and home decor to apparel, electronics and even travel. But with anything, there comes a time to pay the piper, and many people are missing it, paying a high price in the bargain.

“Similar to layaway programs used by previous generations, buy now, pay later services can be a great tool for people who wish to make a purchase and break up their payments into smaller, more manageable dollar amounts,” said Colleen McCreary, financial advocate at Credit Karma, in a release. “Unlike layaway plans, however, missing a payment toward BNPL loans can have a negative impact on your credit score, which can make it harder for you to borrow in the future.”

Under layaway plans, customers make a deposit or small payments to reserve a product until they can afford to pay off the balance. If they fail to pay the entire amount, the retailer puts the product back on the shelf. With BNPL, the customer receives the product immediately.

Of those who admitted missing at least one payment, 72% said they believed their credit score declined, the study showed.

It’s important to note that while missing BNPL payments can hurt your credit, paying on time doesn’t help it. Even “if you make regular on-time payments, which normally signals to a lender that you’re a good borrower, it’s unlikely it will be reported to the bureaus,” McCreary said. 

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Credit Karma. “Buy Now Pay Later Surges Throughout Pandemic, Consumers’ Credit Takes A Hit.”

  2. McKinsey. “Buy Now, Pay Later: Five Business Models to Compete.”

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