A growing number of Americans have turned to short-term loans to cover essential expenses, reflecting mounting concerns about a potential recession.
According to a recent survey by online lending marketplace LendingTree, shoppers using buy now, pay later (BNPL) financing options to pay for groceries has risen to 25 percent from 14 percent this time last year.
“It is clear that people aren’t just using BNPL for designer handbags and gaming consoles anymore,” LendingTree chief consumer finance analyst Matt Schulz told Newsweek. “They’re also using it to buy staples such as groceries, and that’s not a good sign.
“It hints that people are really struggling and are looking to tools such as BNPL to help them extend their budget.”
Why It Matters
Economists and financial institutions have been voicing increasingly alarming warnings about the possibility of a major economic downturn hitting the U.S. economy in 2025, some pointing to changing consumer behaviors as early warning signs of a looming recession.
Amid recurring announcements of new protectionist trade measures by the U.S. administration, such fears have been heightened, with many anticipating a resurgence in inflation and rising prices for consumers as companies attempt to cope with higher tariffs on imported goods.
What To Know
LendingTree’s report was based on online surveys of 2,000 U.S. consumers aged 18 to 79 between April 2 and 3.
According to the study, one-third of Gen Z BNPL users (those aged 18 to 28) admit to having used the financing option to afford groceries, this being the fourth most common use for the group behind clothing, technology and home decor.
In addition to an increased number using BNPL for everyday goods, the survey revealed that 41 percent of users admit to having paid late over the past year, up 34 percent from April 2024, though 76 percent of these were late by no more than around a week.
LendingTree also found that around two-thirds had considered using BNPL for food deliveries. It cited the recent partnership between food delivery service DoorDash and BNPL financing provider Klarna, as evidence of the growing popularity of this payment method.
What People Are Saying
LendingTree chief consumer finance analyst Matt Schulz told Newsweek: “More people are paying late and using these loans for groceries and seeing BNPL as a bridge to their next paycheck. That’s further proof of the toll that inflation, high interest rates, and general economic uncertainty continue to take on American families. Unfortunately, however, there’s no reason to think that is going to change anytime soon. It may actually get worse before it gets better.”
“BNPL can be a useful tool when handled wisely,” he added. “However, there’s risk involved, too, especially because it can be easy to get several of these loans in a short time. That’s why it is so important to understand what you’re getting into before you get one of these loans.”
Personal finance expert George Kamel, in response to the DoorDash-Klarna partnership announced in March, told Newsweek: “Look, I love a good delivery order as much as the next guy, but if you have to finance your DoorDash with Klarna, that’s not convenience—that’s a crisis. We’ve normalized debt so much that now it’s OK to go into payments for burgers and fries? That’s not helping people—it’s preying on them.”
What Happens Next?
Economists are increasingly in agreement that the global economy will enter a recession in 2025. According to a recent survey of economists by Reuters, 60 percent rated the likelihood as high or very high, while only 39 percent viewed it as low.