Fed survey: BNPL use ticks up, late-payment rate jumps

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The number of consumers who fell behind on their buy now/pay later payments jumped last year, according to data compiled by the Federal Reserve.

In its latest Survey of Household Economics and Decisionmaking, or SHED, report, the Fed found that 24% of BNPL users were behind on payments in 2024, up from 18% in 2023. More than half of those late payers, 13% of the total user base, were charged extra because of their delinquency.

Overall use of installment payment services ticked up from 14% to 15%, according to the survey.  

Low-income borrowers were the most likely to miss payments, according to the survey, with 40% of users earning less than $25,000 a year reporting a delinquency. Among consumers earning between $25,000 and $49,999 — the income group with the highest reported BNPL usage rate at 19% — 26% said they paid late last year.

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Delinquencies were also more common among younger demographics, with 32% of 18- to 29-year-olds reporting at least one late payment last year. Black and Hispanic consumers — who had the highest usage rates of BNPL products at 25% and 21%, respectively — also had higher than average late payment rates, at 29% and 32%.

Most BNPL users turned to the product because of personal preferences, with 87% saying they did so to spread out payments over time and 82% reporting that it was a matter of convenience. But more than half of users said they would not otherwise be able to afford their purchases if it weren't for BNPL programs. This was particularly true for lower-income respondents, with 72% of BNPL users earning less than $50,000 saying they used it to pay for something otherwise out of reach, up from 69% last year.

Meanwhile, credit card ownership declined slightly, with 81% of respondents saying they owned at least one, down from 82% last year and a peak of 84% in 2021 but up from 77% in 2015. The share of consumers carrying a balance on their credit cards fell to 46%, down more than 10 percentage points from a decade prior. 

The survey found that middle-income earners — those making between more than $25,000 but less than $100,000 — were the most likely to carry a balance from one cycle to another. A higher share of low-income respondents carried balances, but a smaller share of those adults owned credit cards. 

Black consumers had the lowest credit card ownership rate at 69% as well as the highest prevalence of carrying a balance at 72%. Likewise, 72% of Hispanic respondents said they own a credit card and 60% carried a balance. 

Those two groups also reported the greatest difficulty in attaining credit, with 51% of Black respondents and 44% of Hispanic respondents saying they were approved for less credit than they applied for last year, compared to 26% of white respondents. 

The shares of Black and Hispanic consumers who have been approved for less credit than they sought have been rising since 2021, according to the report. White applicants being approved for less credit also rose in 2022 and 2023 before declining slightly last year.

The use of cryptocurrency remained scant, according to the report, with only 8% of respondents saying they engaged with digital assets in any way. This was up slightly from 7% in 2023 but down from the 12% tracked in 2021.

The primary use of crypto for those who did purchase it last year was for investment, rather than transacting, as was the case in 2022 and 2023. For the small share that did acquire crypto to transact with it — roughly 2% of respondents — more than a third said they did so based on preferences of the person or business to which they were sending funds.

Other common reasons included a desire to send funds quicker, less expensively and with more privacy.

The survey also noted a rising prevalence of financial fraud, particularly for older adults. Overall, 21% of respondents said they experienced some kind of financial fraud last year, including 17% who said they were the victim of a credit card scam.

More than a quarter of respondents aged 45 or older reported experiencing some kind of fraud in 2024, including roughly 10% that reported falling victim to a non-credit-card-related scam. Across all age groups, 63% said they lost some money as a result of fraud and 32% said they were unable to recover at least some of those lost funds. In total, non-credit card fraud resulted in $84 billion of losses, including $63 billion that was borne by consumers.

While concerns remain about inflation and there were some mixed signals from the labor market — including a smaller share of job switchers reporting higher satisfaction with their new roles — the report painted a picture of solid financial health for U.S. households. 

Overall, 73% of respondents said they were doing OK or living comfortably, up from 72% in 2023 but down from the peak of 78% in 2021. In a statement released with the report, Fed Gov. Michael Barr said the annual survey helps the central bank better understand the health of the overall U.S. economy. 

"The financial well-being of American households and businesses is essential to our nation's overall economic vitality," Barr said. "It is critical for the Federal Reserve to understand the challenges households and businesses face as we work to promote a healthy economy and strong financial system."