Buy Now Pay Later: Gen Z’s Go-To Financing Choice
In today’s on-demand but cost-conscious world, it’s no surprise that Buy Now Pay Later (BNPL) services are trending as Gen Z’s favorite payment method.
BNPL is essentially a short-term, typically interest-free loan, allowing shoppers to buy a product now and pay in installments over a set time period. Popular uses run the gamut from paying for apparel and home decor to appliances, electronics and even food delivery services.
Platforms such as Affirm or Klarna are popular with younger generations because they’re flexible, convenient, and a seemingly lower-risk choice compared to traditional credit.
In fact, this year the Consumer Financial Protection Bureau reported that among borrowers ages 18-24, BNPL purchases made up 28% of total unsecured consumer debt compared to 17% among borrowers of all age groups.
Why are younger consumers using BNPL?
80% of shopping by Gen Z is done online, and BNPL options are very easy to implement into online storefronts. BNPL services are often included as a payment method at checkout. After filling up their online shopping carts, consumers are easily tempted by the convenience of getting what they want now without having to pay a hefty price immediately. This is especially true for younger generations who typically have less purchasing power than older generations.
Convenience isn’t the only benefit to using BNPL services. Others include:
- Flexibility: Spreading payments out over time without accruing interest makes larger or unexpected purchases easier, especially on tight budgets.
- Credit without a card: Securing a credit card requires a credit score and credit history and carries the possibility of accumulating interest and debt. But BNPL approvals typically only require a bank account, debit card and mobile number. You can avoid credit cards but still buy on credit.
- Instant gratification: Get what you want now, even if you don’t have the cash on hand.
- A budgeting tool: Many BNPL users view the structured payment schedule to plan and budget for expenses.
The downside of using BNPL
Just because it makes spending easier, BNPL isn't necessarily safer for your finances. The services open consumers to financial risks that may not be worth the convenience. Some BNPL cons include:
- Fees and interest: While they don’t carry automatic interest like credit cards, BNPL plans can charge late fees or interest on unpaid balances if you miss a payment. Unpaid balances can be turned over to a collection agency.
- Credit Score: BNPL lenders do not typically report your payment history to the major credit reporters. However, as of fall 2025, FICO will start including BNPL loan data into their credit scoring products, meaning missing a BNPL payment could affect your credit score down the line.
- Potential overdrafts: If BNPL payments are drawn automatically from your bank account, ensure there’s enough money to cover the payment and avoid overdraft fees.
- Overspending: Just like buying on credit, using BNPL makes it easy to buy more than you can afford. Multiple purchases with pay-later arrangements can leave you with a hefty monthly bill.
- Missed benefits: Credit cards offer purchase protection and often issue rewards from cash back to airline points. BNPL plans have no such protection or perks.
- Potentially difficult returns: If a return is approved, the merchant returns the funds to the BNPL lender. It can take time to return the funds to you. Meanwhile, you still must make payments until the BNPL provider adjusts your payment schedule.
Should You Use BNPL?
Like many financing methods, BNPL options are designed for convenience and flexibility, but their usefulness depends heavily on your personal financial situation.If you use BNPL be prepared to pay on time to avoid fees and ensure your bank account is sufficiently funded for automatic payments. If that’s a stretch, you may want to consider a 0% APR credit card, store financing deals or a high-yield savings account where you can save up for major purchases. Know your financial picture and be smart about borrowing money you don’t have.
