ACCI Conference 2024

Buy now, pay Later” (BNPL) services enabling zero-cost short-term financing for purchases have gained a lot of prominence in the recent years, especially over the pandemic. Using survey data from the Federal Reserve Board’s Survey of Household Economics and Decision making (SHED), we explore the sociodemographic and financial characteristics correlated to the adoption of BNPL products. Households younger than 35 years, of racial minority are more likely to use BNPL services, whereas households older than 45, with a graduate degree or more, homeowner, and U.S. citizens are less likely to use BNPL services. Since BNPL is a short-term financing service, we wanted to examine the role of BNPL use in moderating the relationship between credit card debt management and financial wellbeing of consumers. The interaction between BNPL usage and frequencies of having unpaid credit card balances illuminated that, when used judiciously, BNPL services might mitigate the negative repercussions commonly associated with unpaid credit card debt. In a market that largely remains unregulated in the U.S., it is imperative that financial educators and consumer advocates emphasize the importance of cautious credit use and the potential ramifications of debt accumulation, ensuring that households are equipped to make informed decisions in an increasingly complex credit landscape.

Author(s): Aditi Routh, Congrong Ouyang