Nearly 78M Americans Utilized Buy Now or Pay Later, and Buy Now in the past year.
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Nearly 78M Americans Used Buy Now, Pay Later and Pay Later in the previous year.
NERDWALLET 2022 PERSONAL LOANS REPORT
by Elizabeth Renter Senior Writer/Spokesperson | Data analysis, Personal finance economics Elizabeth Renter spends her time looking for consumer-oriented insights from data sets and crunching figures for everything personal finance. She has had her work cited as a result by The New York Times, The Washington Post, the «Today» show, CNBC and elsewhere. Before being a part of NerdWallet at the beginning of 2014, Elizabeth was freelance journalist. When not working with numbers and words, Elizabeth enjoys traveling, lifting weights, and renovating the beauty of her Victorian home. She lives at Clay Center, Kansas.
Oct 11, 2022
Edited by Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. The editor came to NerdWallet after 15 years managing content for MSN.com which included food, health, and travel. She started her career as a journalist for publications which covered mortgage, supermarket and restaurant industries. Kim received an undergraduate degree in journalism from the University of Iowa and a Master of Business Administration from the University of Washington.
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When your car fails to start or your utility bill skyrockets there is room in your budget to cover these expenses. And when the cash doesn’t exist, you may turn to other, sometimes more costly options.
While 50% of Americans are likely to use credit cards in order to settle for bills and cover other household expenses in tough economic times if they didn’t have cash on hand Others would look to newer, nontraditional sources in the wake of a NerdWallet survey of 2,065 U.S. adults conducted Aug. 4-8 online by The Harris Poll.
According to the study, 14% are likely to use «buy now buy later» services, and 11% would use mobile cash advance applications to pay for bills or other household expenses during tough economic times.
«Buy now, pay later isn’t just for clothing and shoes. People use these services for necessities like food, gas and health-related costs,» says Annie Millerbernd the head of NerdWallet’s personal loans. «They appear to be an easy way to cover essentials when you don’t have cash. However, problems arise when you aren’t able to make the payment in time.»
Within the past year many millions of Americans have embraced these relatively new financial tools, and the youngest adults are often leading the charge, according to the survey.
Editor’s note: In the report, when we discuss what sources of financing Americans would most likely use in tough economic times in the future, we’re talking about the sources they’d most likely turn to to pay their bills and other household expenses in the event they did not have enough cash on hand to cover them.
Key findings
Credit cards are an essential part of our lives, but buy now, pay later can also be an option during difficult financial times. The majority of Americans (50 percent) are likely to use credit cards to pay for payments and other household expenses in tough economic times, when they don’t have cash on hand. Some might opt for more modern funding types: 14% would be more likely to utilize buy now, pay later and 11% would make use of mobile cash advance apps for bills and expenses during such times, according to the survey.
Millions of people have used buy now and pay later over the past year. Around the 78-million Americans (30 percent) have used the buy now and pay later services in the last 12 months, the survey discovered. Of them, they’ve utilized it six times, on average.
Apps for cash advances on mobile devices can give millions of Americans money fast. Roughly 49.2 million Americans (19 percent) have utilized apps for cash advances on mobile devices in the last twelve months. Like BNPL the apps are most popular among younger generations. For instance, 38% from Gen Z (ages 18-25) and 39 percent of millennials (ages 26, 41,) have utilized them in the past year, versus 11% of the Generation X (ages 42 to 57) and the baby boomers, who comprise 2% (ages between 58-76) According to the study.
More Americans utilize BNPL than personal loans. In the past 12 months 24 percent of Americans which is 62 million, have taken out at least one personal loan taking out $5,046, in the average in that time according to the study.
Where Americans are able to turn when they face difficult times
The majority of Americans (50 percent) are most likely to utilize credit cards to pay for bills or other home expenses, if they didn’t have enough cash on hand to pay for them in times of economic hardship, like a recession, unemployment or other unexpected costs. They were also the top commonly mentioned financial source in the survey.
Fewer, 43% of Americans are likely to use their emergency savings account to cover such expenses during those times according to the study. Saving money like this requires time and enough room in your budget to allow it to happen. Naturally, not everyone has such savings available.
For a chart illustrating how different generations responded to the poll, .
«There are plenty of borrowing options when money is tight, but credit cards and personal loans may have extremely strict borrowing conditions,» Millerbernd says. «Buy now or pay later, and cash advances are much easier to qualify for but could cause people to overextend themselves.»
Buy now, pay later is overwhelmingly popular again
About 77.7 millions Americans have utilized the internet in the last 12 months according to the study. It’s 30% of Americans, down slightly from 37% in the survey we conducted in September 2021.
And they’ve used it frequently around six times over the past 12 months, on average.
Pay later and buy now is an installment loan that is made at the time of purchase, be it the cash register or online. This type of service can make it easy to spend more than you typically would since you’re paying only part of your bill at the point of purchase. They also are accompanied by possibly significant charges, particularly in the event of a late payment. Because loans typically don’t require a formal credit check, they may be attractive to those with poor credit scores or aren’t eligible for other forms of credit.
Half of Gen Z and millennials (50%) and 44 percent of Gen Z have used BNPL over the last twelve months, as per the survey. That’s compared with 25 percent from Gen X and 14% of baby boomers.
49.2M use cash advance mobile apps in the last year
Around 49.2 million Americans (19%) have used a smartphone in the past 12 months, as per the study.
Mobile cash advance applications, also known as paycheck advance applications, basically loan you money from your future paycheck. These loans have limits, generally up to a few hundred dollars, and many of them have fees for subscriptions or other charges that are included. While they may provide quick cash when you need it and you aren’t able to tap other sources, they can be costly if you consider the amount you can borrow.
Like BNPL Mobile cash advance usage is more prevalent among younger generations. For instance, 38% of Gen Z, 39% of millennials 11 percent of Gen X and 2% of baby boomers have utilized these apps over the past year.
Also, these apps will be more frequently utilized by people who earn less — 26% of those who earn less than $50 and 22 percent of people who have a household income of $50,000-$74,999 have utilized these apps over the last 12 months, while 15% of those with household incomes of $100,000 or more.
Personal loans are a funding source for one-quarter of Americans
The personal loans are a long-standing source of money to consolidate debt or for purchasing new goods. They are a fixed-rate loan and the interest rates may be lower for qualified borrowers. However, the percentage of Americans who use personal loans is lower than the percentage of borrowers who utilize BNPL services. The two funding sources could at times be used for the same purposes.
In the last 12 months, about 62 million Americans (24 percent) have taken out at least one personal loan which is a slight decrease from 29% in the previous year .
In the average, these borrowers were able to take out $5,046. An impressive 28% of borrowers took out $5,000 or more over the one-year period.
Time horizon: One way to determine your preferred source of money
If you’re looking to or require to purchase something, you are able to do so outright with available cash or a debit card, or a credit card you can pay in full before each due date. But unexpected expenses and trying financial times may arise often, and big purchases aren’t able to fit within a budget.
While all of these options have you paying them back over time taking into consideration the time frame you’ll need to pay off the expense is a starting point for choosing the right source.
Short-term finance
If you need money quickly and only for a short period, consider the following options. The expenses related to these options — which include interest and/or fees — can be high, so you’ll need to commit to a quick payoff and ideally utilize them to meet your needs, not wants.
Mobile cash advance apps: Use in case of an emergency, even in absence of an emergency fund. These tools may be appropriate to fill in a gap in income or pay for an unpaid utility bill just a few days prior to your paycheck, for example. However, be aware that they allow you to keep borrowing.
Credit cards: Credit cards are an an excellent way to cover expenses, provided that you can pay the balance before the due date. Don’t do it and the interest fees will quickly mount up.
Medium-term funding
The consolidation of debts and sudden costs — such as a home appliance that quits or car repairs might not take many years to pay, but certainly more than a few weeks.
Credit card with 0% APR If you’re eligible for credit cards that offer up to a year of free credit. They can be particularly useful for the transfer of high-interest credit card debt, or for large unexpected expenses. Be sure to pay off the amount in full before the interest-free period ends, or you’ll owe the interest you accrued in that time, too.
Buy now, pay later: Terms vary by BNPL company, however some may provide terms that last for several months or even years. The downside is that most do not report timely payments to credit reporting agencies, so they won’t help to build credit.
Financing sources with a longer-term term
The sources that let you pay off a loan or line of credit over a longer period may require credit requirements that aren’t available for short-term loans. However, one benefit is the money will not «cost» you the same amount — interest and fees are generally lower.
Personal loan: Personal loans could have a higher threshold for eligibility, however they could be an important source of funds which are paid back over a long period. If you can get them through traditional credit unions or banks, you may qualify for a lower rate in the event that you’re an existing credit card holders.
401(k) loan: These loans can be a risky investment because you’re borrowing against your savings, and in the event that there’s a job loss and you you aren’t able to repay it the loan may be rescinded and taxed as a withdrawal. However, the interest rates could be advantageous and loan amounts are generous, and do not require a credit screening.
Line of Credit for home equity, also known as cash-out refinance: Homeowners are able to make use of additional sources of funding by tapping into the equity in their home. This type of financing can be low-interest, but like a mortgage, it can also put your home’s value in jeopardy if you default.
«Emerging financing options like BNPL as well as cash advances apps throw a wrench in the traditional set of financing options,» Millerbernd says. «The most important thing to do when borrowing money is knowing how you’ll repay it in advance.»
METHODOLOGY
The online survey is conducted across the U.S. by The Harris Poll on behalf of NerdWallet between Aug. 4-8, 2022, among 265 U.S. adults ages 18 and over. The precision of sampling of Harris online polls is assessed using a Bayesian reliable interval. In this case, the sample data is accurate up to +/-+/- 2.8 percentage points, using 95% confidence levels. For more information on the survey’s methodology that includes weighting variables and subgroup sample sizes, please contact Alikay Wood at
Calculations that determine how many Americans have taken advantage of personal loans Buy now, pay later; and mobile cash advance apps Based on estimates of the population for 2021 taken from census data from the U.S. census.
The survey question about funding sources used in tough economic times was phrased «Which of the following are you most likely to use to pay your bills and cover other household expenses during tough economic times (e.g. recession, job loss, unexpected costs) in the event that you were not able to have money in your bank to cover these expenses? Select all that are applicable.»
Disclaimer
NerdWallet disclaims, expressly and impliedly, all warranties of any kind, including merchantability and fitness for a particular purpose , or whether the article’s information is reliable, accurate or free of mistakes. Use or reliance on this information is entirely at your own risk, and its accuracy and completeness cannot be guaranteed. The information of this article should not be relied upon or associated with the performance in the future or performance of NerdWallet nor any of its affiliates or subsidiaries. Statements that aren’t historical facts are forward-looking statements and involve risks and uncertainties, as expressed in terms such as «believes,» «expects,» «estimates,» «may,» «will,» «should» or «anticipates» or similar phrases. These forward-looking statements could materially differ from NerdWallet’s presentation of information to analysts , as well as its actual financial and operational results.
About the author: Elizabeth Renter’s role as an experienced chief writer as well as data analyst for NerdWallet has been mentioned in The New York Times, The Washington Post, CNBC and many other publications.
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