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The Evolving Face of Buy Now, Pay Later Borrowers

The Evolving Face of Buy Now, Pay Later Borrowers

Recent survey data reveals that Buy Now, Pay Later (BNPL) services are not just for luxury splurges but have become a mainstream credit product essential for many families to manage daily expenses. Contrary to the stereotype of BNPL users as fashion-forward millennials, data shows that households with financial instability frequently use BNPL for small, regular purchases that they otherwise could not afford. The New York Fed highlights that these "more-fragile households" rely on BNPL to smooth cash flow, while financially stable households use it primarily to avoid paying interest on credit purchases. The Philadelphia Fed found that BNPL users often face more financial disruptions and employ various coping strategies like working extra hours or borrowing more. The Boston Fed's data indicates that 70% of BNPL users revolve credit card debt, compared to 40% of non-users. Additionally, racial and income disparities are evident, with BNPL usage being higher among low and middle-income adults, Black and Hispanic adults, and women. These findings underscore that BNPL fills a critical financial gap for many, acting as a substitute for traditional credit cards or unsecured loans. The Consumer Financial Protection Bureau's new classification of BNPL lenders as credit card providers aims to offer consumers better protection, allowing disputes and refunds for BNPL purchases. This regulatory shift reflects BNPL’s growing role in the financial lives of a diverse user base.

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