Buy now, pay later use surges among lower-income Americans as consumer debt hits $19 trillion, with late fees and credit score risks mounting.

Between 2019 and 2021, the number of buy now, pay later loans originated in the U.S. grew from 16.8 to 180 million (a 970% increase), while dollar volume climbed more than 1,000% to $24.2 billion, according to a 2022 Consumer Financial Protection Bureau report. Slightly more than half of Americans have used buy now, pay later at least once for an online purchase.

Lower-income Americans—those earning under $48,000 annually—use installment plans more frequently than middle- or higher-income households. A 2024 Federal Reserve survey found 57% of buy now, pay later users reported using the service because they had to, with most saying they would not be able to afford a product otherwise. Among Americans with a credit score below 620, 84% say they have to use buy now, pay later products out of necessity.

Nearly half of buy now, pay later users made at least one late payment in the past year. The Consumer Financial Protection Bureau found the average assessed late fee in 2023 was $9.99. FICO announced it would begin incorporating buy now, pay later data into credit scores, which could further lower Americans' average credit scores as late payments are reflected.

American households held $19 trillion in consumer debts in the first quarter of this year, according to the Federal Reserve, covering education, cars, homes, and credit card purchases combined with buy now, pay later obligations.