BNPL lenders target basic household utilities as prices surge

Buy Now, Pay Later companies are increasingly moving beyond discretionary purchases and allowing Americans to use installment financing for essential household expenses such as rent, utility bills, groceries and medical costs. The expansion comes as many households face higher living expenses and slower wage growth, prompting consumers to seek short-term credit to manage their monthly budgets. Lending platforms such as Flex and Zip now allow customers to finance payments for services including electricity, water, broadband, mobile phone bills, health insurance and mortgages. Affirm has also expanded into rent financing, giving tenants the option to spread monthly housing payments over time while promoting installment plans for everyday purchases such as back-to-school supplies. The growing use of installment credit reflects broader changes in how Americans manage basic expenses as household budgets come under pressure. A Data for Progress survey found that 46% of BNPL users had used installment financing to purchase groceries, while 42% had used it for medical or dental expenses. Another 39% reported using BNPL for utility bills, 38% for gasoline and 22% for childcare. The figures highlight how installment lending is increasingly being used for necessities rather than optional purchases. Federal Reserve research cited by The New York Times found that Americans spent approximately $160 billion through installment loan programs last year, nearly twice the amount recorded in 2023. Although that figure remains significantly smaller than the roughly $3 trillion Americans spend annually through consumer credit cards, installment lending continues to expand at double-digit rates. Major companies competing in the sector include Affirm, Klarna, Afterpay, PayPal, Synchrony, Splitit, Sezzle and Zip. The industry has attracted significant investment from private equity and venture capital firms as financial technology companies seek to capture a larger share of consumer borrowing. However, the rapid growth has raised concerns among consumer advocates about the financial risks faced by households that rely on installment loans for essential expenses. Critics argue that consumers may turn to BNPL services because they lack enough cash to cover basic bills, potentially creating a cycle in which one payment is delayed to cover another. Consumer advocacy group Protect Borrowers has also warned that products advertised as fee-free can carry penalties when borrowers miss payments or encounter other financial problems. Late fees can reportedly range from $7 to $8 per missed payment and may be capped at as much as 25% of the purchase price, while additional charges can apply in certain circumstances. Advocates argue that consumers should have clearer information about the total cost of borrowing before using these services. Policy analysts are calling on Congress to introduce stronger federal regulations targeting misleading pricing and potentially predatory practices within the installment lending market. As BNPL providers continue expanding into rent, groceries, utilities and other necessities, the debate over whether these services provide useful financial flexibility or deepen household debt is likely to intensify. The growing reliance on installment financing demonstrates the increasing pressure many American households face in managing everyday costs while also raising questions about the long-term consequences of borrowing for basic needs.