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Discussion Paper

How Does Buy Now, Pay Later Affect Customers’ Credit?

Valeria Zeballos Doubinko &
Tom Akana

September 2023

DP 23-01 – This paper explores the relationship between consumers’ use of buy now, pay later (BNPL) and their credit reports. We conduct this analysis to evaluate concerns that BNPL use could negatively affect consumers’ financial health.

Buy now, pay later (BNPL) is a deferred payment tool that allows consumers to split transactions into four payments over six weeks. Unlike many other financial products, it is offered primarily by fintech companies and advertised to consumers as free from fees and credit checks. These providers typically do not report a consumer’s use of BNPL and subsequent repayment behavior to credit bureaus, which makes studies of BNPL users’ credit more challenging.

Currently, many researchers hypothesize that BNPL will negatively impact users’ credit over time. As BNPL is unreported to credit bureaus, they worry that individuals may take out multiple loans simultaneously and overextend themselves. Moreover, they speculate that the lack of hard credit checks could cause overborrowing for individuals who have limited access to traditional credit products.

This analysis evaluates if these concerns are substantiated by the data. To analyze the impact of BNPL on consumers’ credit, we leverage a unique data set combining anonymized survey data and appended credit bureau data collected by the market research firm Competiscan on behalf of the Consumer Finance Institute (CFI) of the Federal Reserve Bank of Philadelphia.

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Buy Now, Pay Later: Survey Evidence of Consumer Adoption and Attitudes

Tom Akana

17 Jun ’22

DP 22-02 – Consumers use a variety of tools to make purchases with deferred payments — general-purpose credit cards, private-label cards, and point-of-sale installment loans have all been available in various forms for decades.