More Americans are turning to "buy now, pay later" financing for everyday purchases like food delivery and groceries.
But new data suggests a growing number of people struggle to keep up with those payments.
Findings from LendingTree show 41% of people who have used buy now, pay later programs made at least one late payment in the past year. That figure is up from 34% just a year ago.
"It's becoming a more common type of debt that folks are reporting that they're trying to manage, among all of their other debt obligations," said Thomas Nitzsche, a financial educator with the nonprofit Money Management International.
Nitzsche said the nonprofit is counseling more young clients in their 20s and 30s, many of whom use buy now, pay later services.
Nitzsche described buy now, pay later debt as a type of "shadow debt."
Historically, lenders didn’t report debt to the major credit bureaus, but that is starting to change.
"It can really swing at consumers either way. It can either help them out if they're maintaining those good payments, or it could potentially hurt them if they are missing payments," Nitzsche explained.
WATCH: A BNPL customer talks about his struggle to get out of debt:
"It really scares me"
Liam Chavez is one of Money Management International’s clients. After moving away from family and a job loss, he turned to the nonprofit for help managing about $15,000 in credit card debt.
"They worked with each of my creditors to lower my interest. Instead of 30% interest, it's 1% or 2%," Chavez said. "I'm not stuck in that vicious cycle anymore."
While Chavez doesn't blame buy now, pay later for his debt, he sees how it could lead to overspending.
"I could see that becoming a huge, huge pit very quickly," Chavez said. "It really scares me when I see on eBay, on DoorDash they say '$5 for this burrito for a month.'"
LendingTree offers a few ways consumers can use buy now, pay later without the risk of debt:
- Stick to one loan at a time
- Use a credit card for easier returns
- Take a moment to understand the rules and fees involved
As an open water swimmer, Chavez reserves buy now, pay later for expensive swim gear.
"For example, I bought a really nice parka for keeping warm before and after my swim," he said.
But with every purchase, he follows a strict budget.
"I can see people just continuing to use that over and over and then all of a sudden they have a huge accrual of this debt," he said.
Manage buy now, pay later loans carefully, so you don’t waste your money.
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