For some American consumers, “buy now, pay later” loans aren’t just for big-ticket items like televisions and vacations. They’re for groceries, too.
When Tia Hodge, stocked up at her local Kroger in early April, her bill was nearly $400.At checkout, she scanned her app from Klarna, a buy now, pay later company that offers short-term loans. Klarna paid the grocery store for the 71 items in the cart. Mrs. Hodge split her payments to Klarna into four installments of about $100, with zero interest.
“Food prices have skyrocketed,” said Mrs. Hodge, of Austell, Ga., who plans how much she’ll spend on each trip to the grocery store based on her cash flow and other expenses that month, including credit-card debt and student loans. Being able to spread out the payments for groceries has helped her family of four — soon to be five — budget better, she said.
Mrs. Hodge, 29, is hardly alone. Nearly a quarter of consumers using buy now, pay later loans finance groceries, up from 14 percent a year ago, according to a recent LendingTree survey. And it’s not just groceries; more Americans are using these loans to pay for recurring monthly bills, such as electricity, heat, internet and streaming services like Hulu.
Consumers can break up gasoline purchases into installments or pay for the burrito or burger order delivered to their home in bite-size pieces. People are going on social media to share tips on how to use the short-term financing even for rent.
While some borrowers say the loans are a useful way to manage cash flow, others say the increased use of buy now, pay later plans for day-to-day essentials is a troubling sign that more consumers are financially stressed.
“I don’t think there’s any question that it is at least a sign of how much people are struggling,” said Matt Schulz, chief consumer finance analyst at LendingTree. “If you’re living paycheck to paycheck and you’re on a tight budget and you have several of these loans out at one time, it can be very easy to get over your skis here.”
Others don’t see a problem, and view this type of financing for day-to-day expenses as part of the industry’s growth and a better option than paying with traditional credit cards.
“I don’t think it’s a sign of the financial apocalypse per se,” said Christopher Uriarte, a payments expert at the consulting firm Glenbrook Partners. “We’re seeing these companies getting into many different sectors that they have not traditionally been in.”
Buy-now, pay later financing, a cousin to once-popular layaway programs, gained momentum during the pandemic when online shopping surged. In 2019, consumers in the United States bought about $2 billion worth of goods and services using pay-later loans. By 2023, that amount ballooned to more than $116.3 billion, according to CapitalOne Shopping Research. But that is still a fraction of the $1.18 trillion that consumers bought with credit cards in 2025, according to the latest consumer debt data from the Federal Reserve Bank of New York.
As companies like Klarna, Affirm and Afterpay quickly grow, the increased availability and ease of obtaining these loans could encourage young and low-income Americans to take on more debt than they should, some consumer groups warn. Companies that offer pay-later loans typically do not conduct hard credit checks like traditional credit cards do.
Instead, the pay-later firms approve short-term financing, $500 for a television or $40 for a fast-food takeout order, based partly on a consumer’s stated income and payment history with the company. Typically consumers aren’t charged interest if they pay the installments on time. A majority of pay-later companies make most of their money by charging fees to retailers.
Many of the loans aren’t routinely reported to credit bureaus or captured in public data, a potential hidden source of risk to the financial system that is sometimes referred to as phantom debt.
Consumers and pay-later companies argue that the loans are a better and cheaper financing option than traditional credit cards that have steep interest rates.
“I’ve used the loans for groceries and even to pay my phone bill,” said Randis Dennies, 42, an operations supervisor for a retailer distribution center in Memphis. He said the loans allowed him to manage his cash flow better and to borrow with zero interest. “When everything has gotten so expensive — groceries, gas — it makes my life easier to use these loans to buy my groceries or whatever else I need at that moment,” he added.
The companies that offer these loans are partnering with an increasing variety of merchants.
Affirm is using its experience in underwriting higher-cost purchases, like furniture and exercise equipment, to underwrite “everyday purchases,” a spokesman said in an email.
Food prices are 28 percent higher than they were in 2020, according to the U.S. Bureau of Labor Statistics. Those continued high prices are particularly tough for lower-income households, which spent roughly ?v=96744″ rel=”noopener noreferrer” target=”_blank”>a third of their after-tax income on food in 2023, compared with 13.5 percent for middle-income households, according to the Department of Agriculture.
Those same lower-income households — earning less than $50,000 a year — are also the biggest users of buy now, pay later programs, according to the annual survey of U.S. households released last month by the Federal Reserve.
“Inflation in food prices and across all of our daily lives has led people to take on debt or dip into their savings,” said Ted Rossman, a senior industry analyst at the financial website Bankrate.
And there are signs that borrowers are under strain with these loans. Nearly a quarter of all pay-later users made a late payment last year, up sharply from 2023, the survey reported.
Klarna, a Swedish company that is among the fastest-growing providers in the United States, reported a 17 percent year-over-year increase in credit losses in the latest quarter. The company, which has paused its I.P.O. plans amid tariff-related market volatility, said that its default rate rose only marginally and represented a tiny share of its total loans.
Last year under the Biden administration, the Consumer Financial Protection Bureau worried that pay-later customers would be especially vulnerable if the economy worsened and issued an interpretive rule to regulate the companies the same way it does the credit card industry.
This spring the agency, which the Trump administration has tried to dismantle, said it would not “prioritize enforcement actions” on pay-later loans.
Mrs. Hodge said she started to use buy now, pay later loans a couple of years ago when she moved to the Atlanta area from New York and money was tight.
She said that she carefully tracked her spending and bank withdrawals, and never had a late or missed payment, which, she fears, would mean losing access to these loans. “This is a resource that helps my family and I don’t want to mess that up,” she said.
Stores and service providers also seem eager to offer the payment option, even though it’s fairly costly for merchants to do so. The fees that the pay-later companies charge are often more than double the so-called “swipe” fees merchants pay to process transactions with credit card networks and banks.
But it may be worth it because customers are more likely to make a purchase and buy more items when the loans are available, saidMr. Uriarte.
“In the beginning when I started to use these plans, I was very irresponsible,” said Victoria Blocker, who works for a veterans affairs hospital in Augusta, Ga.Then, one day, she looked at her bank account and was surprised to see nearly daily withdrawals from the various pay-later companies.
Since then, she has been using the financing only for specific big-ticket purchases, like her honeymoon trip to Hawaii.
“I had to take a step back,” Ms. Blocker said. “It had become a trap for me.”
Julie Creswell is a business reporter covering the food industry for The Times, writing about all aspects of food, including farming, food inflation, supply-chain disruptions and climate change.
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