Struggling Americans are turning to trendy, risky buy now, pay later loans to afford groceries, gas

Debit or credit? In this economy?Cash-poor and maxed-out consumers are increasingly turning to trendy “buy now, pay later” microloan products to afford everyday necessities — as inflation and the cost of living rise faster than salaries and bank balances.A report from Lending Tree found that 29% of users of popular BNPL brands like Klarna and Affirm use the services to purchase ever-pricier groceries and other essentials on credit — with 54% saying they wouldn’t be able to make ends meet without the loans.The usage numbers represent a 25% jump from last year — and over double just two years ago.Additional research conducted by the Federal Reserve shows that one in five Americans used BNPL to pay for food from major chains like Walmart or food delivery on apps like DoorDash during the last year alone.Groceries are now third on Lending Tree’s list of items most commonly purchased with BNPL, behind clothing and electronics — which are typically bought using a “pay in four” structure, where the creditor covers the cost of the purchase.

The consumer then pays off the debt over a period of weeks or months, often interest free.The trouble with that seemingly useful tool, experts say, is that when shoppers rely on this new way to pay too heavily, they can become quickly overwhelmed — an issue that’s becoming all too real for many, according to multiple reports of rising default rates.Ashley Morgan, a debt and bankruptcy lawyer in Northern Virginia, worries about the way BNPL has become normalized — without being widely understood for what it is.“Buy Now, Pay Later has become so common that many consumers don’t really think of it as debt anymore,” Morgan said.“A $200 purchase may feel expensive, but four payments of $50 somehow feels affordable.”The problem arises when shoppers can’t stop using it, she explained — a move called loan stacking where consumers can’t resist the urge to keep using the now ubiquitous services.One in...