The Golden Age of Buy Now, Pay Later

The Golden Age of Buy Now, Pay Later is real, but the question is who benefits. In the first quarter of 2026, Klarna, Affirm and Sezzle reported volume growth above 30%. Across the US adult population, however, the share using BNPL rose by just one point, to 16%. The alarm is not a general rush into pay-in-four. It is more serious: card debt is rising mainly among people who already say they cannot make ends meet, while a growing share of workers taps retirement savings to avoid eviction or pay medical bills. Donald Trump created neither this divide nor BNPL. But his tariffs raised consumer prices and his administration reduced federal protection for instalment borrowers. He is not the sole cause of the household budget crisis. He is not irrelevant to it either.

Card debt is changing in nature

An American credit card can be a simple payment method. If the holder pays the full statement balance, there is generally no interest. But the holder can also carry part of the balance into the next month. This is revolving debt: it remains open, renews and incurs interest. In the first quarter of 2026, the average rate charged to accounts that actually paid interest was 21.52%, according to the Federal Reserve. At that price, debt used to finish the month can quickly feed on itself.

The Fed’s latest survey shows exactly who owns the additional debt. With participants’ consent, researchers matched survey responses to anonymised credit records. They compare the same people’s card balances in 2023 and 2025, then group them by how they described their financial situation in 2025.

Among people who said they were finding it difficult to get by, the average balance rose from $6,735 to $9,265, an increase of $2,530 or 37%. Among those living comfortably, it rose by only $59, from $6,248 to $6,307, or 1%. In between, those who were “just getting by” saw their average balance climb from $6,782 to $8,581.

That 65% is the central number. Rising balances no longer mainly describe broadly distributed, buoyant consumption. They are concentrating among households whose income does not comfortably cover expenses. Those living comfortably, by contrast, now explain just 3% of the increase, down from about one-quarter in the previous two surveys.

The scope matters. The calculation covers the 63% of respondents who allowed their answers to be matched with credit records. The 2023 balances belong to the same people surveyed in 2025. It therefore does not directly measure the rise in all US card debt. But it answers the most important question: among the people followed, additional borrowing shifted sharply toward already fragile budgets.

$1.252 trillion, with interest above 21%

The national view confirms the weight of the problem. At the end of the first quarter of 2026, card balances stood at $1.252 trillion, $70 billion higher than a year earlier. The $25 billion decline from the Christmas quarter was seasonal and does not erase the annual increase.

The same release says 7.10% of balances were moving into serious delinquency at an annualised rate, compared with 7.04% a year earlier. This does not mean 7.10% of all cards are already in default. The New York Fed starts with balances that were current, or less than 90 days late in the previous quarter, and measures the share that has just crossed 90 days past due. It then annualises that transition. The pace is nearly stable year on year, but remains high for debt charged at an average 21.52% on interest-bearing accounts.

In May 2026, another New York Fed survey offered a signal closer to daily life. The average reported probability of missing a minimum debt payment in the next three months rose to 12.6%. The increase was driven mostly by households earning less than $100,000 and people with no education beyond high school. Respondents expected their income to grow 2.8%, but food prices by 5.8% and rents by 7.4%. These are expectations, not bills already paid. Their gap nonetheless explains why credit increasingly serves as a bridge between paycheques.

The 401(k) is becoming an emergency fund

The 401(k) is the main employer-sponsored retirement savings plan in the United States. Workers put part of their wages into it, often receive an employer contribution and gain a tax advantage. The money is intended to remain invested until retirement.

A hardship withdrawal lets a worker take money out early for what the IRS calls an “immediate and heavy financial need.” It may pay certain medical bills, prevent eviction or foreclosure, cover funeral costs, repair a primary residence or meet certain education expenses. It is not a loan. The IRS explains that the money is not repaid to the plan, permanently reduces the account and may face tax and a penalty.

Vanguard found that 6% of participants permitted to make such a withdrawal took at least one in 2025, up from 5% in 2024 and 2% in 2020. The median amount was $1,900. More importantly, 46% of those participants withdrew money more than once during the year and 21% did so at least three times. This is no longer only an exceptional bill: for nearly half of the workers concerned, the retirement plan is functioning as emergency savings.

It would be wrong to attribute the entire rise to distress. Vanguard also says rules were relaxed and administration simplified. More lower-income workers are automatically enrolled in a plan, so more can access it. Fidelity still found in the first quarter of 2026 a record combined 401(k) saving rate of 14.4%, including employers. But that strong average can coexist with repeated withdrawals. Once again, it describes two different groups: those building wealth and those liquidating the future to pay for the present.

BNPL is growing, but its user count is not exploding

Buy Now, Pay Later generally splits a purchase into four instalments, often with no interest if each one is paid on time. In 2025, 16% of US adults said they had used it in the previous 12 months, compared with 15% in the previous survey and 10% in 2021. A one-point annual increase is not an explosion.

Users’ financial fragility is visible, however. Among them, 26% had paid at least one instalment late and 11% incurred an overdraft or nonsufficient-funds fee triggered by a BNPL debit. For 29%, BNPL was the only way to afford the purchase. That answer rose to 40% below $25,000 in family income. One user in five had financed groceries or food delivery; within that group, 45% said they could not otherwise afford the purchase.

Platforms are accelerating faster than the population

Company accounts explain the article’s title. In the quarter ended March 31, 2026, Affirm processed $11.6 billion of GMV, up 35%. Klarna reported $33.7 billion, up 33% globally and 39% in the United States. Sezzle reached $1.1 billion, up 37.3%.

GMV means gross merchandise volume. It is the amount spent through a platform during a period. It is not the platform’s revenue, profit or the debt customers still owe. The three companies do not use exactly the same scope, so their GMV cannot be added together to obtain the size of the BNPL market.

The gap with the 16% user share has a simple explanation. Platforms add merchants and products, while existing customers purchase more often. At Affirm, active customers increased 22%, while transactions per customer rose 20%. At Sezzle, average quarterly frequency rose from 6.1 to 7.1 purchases. Volume growth therefore comes not only from new users, but also from more intensive use.

Adobe’s 2026 recap confirms that “explosion” is the wrong word for the entire market. Adobe is not selling Photoshop here: Adobe Analytics measures purchases on retail websites that use its service. During the four days around Prime Day, June 23 to 26, it observed $2.1 billion in BNPL purchases, up 9.5%. Total online commerce rose 9.3%. During this major event, BNPL therefore grew almost in line with sales, far below the 30% to 37% reported by platforms.

BNPL debt remains partly invisible

Cards appear in national credit files. Pay-in-four is far less visible there. The CFPB’s latest detailed report covers six large providers through 2023. It calculates an average $848 in annual loans per user per provider, 14% higher than in 2022 after inflation.

That $848 is not the balance due on a given day. More importantly, it is not one person’s total BNPL debt. A provider may not see purchases financed by competitors. The same borrower can therefore stack several payment schedules without any platform seeing all upcoming debits. Because loans are short, they can also disappear quickly from balance sheets while absorbing a large share of the next few paycheques. This burden per user, more than the number of users, is the reason for concern.

The available buffer is thin. According to the BEA, the personal saving rate was only 2.7% of disposable income in June 2026. The average does not describe every household because saving is concentrated among the well-off. The l0g US Macro Dashboard tracks this PSAVERT series over time. Reading its decline alongside card debt, 401(k) withdrawals and BNPL late payments shows how little protection remains at the bottom of the distribution.

Trump did not create the divide, but he is making it worse

The timeline rules out blaming Donald Trump for the whole situation. The CFPB estimates that BNPL loans from six large providers had already risen from $2.7 billion to $45.2 billion between 2019 and 2023, in 2024 dollars. The card comparison begins in 2023 and therefore includes almost two years of the Biden presidency. High interest rates, cumulative post-pandemic inflation, rents, medical costs and easier access to 401(k) funds all predate January 20, 2025.

But no single cause does not mean no responsibility. On April 2, 2025, Trump signed Executive Order 14257, imposing an additional 10% duty on a broad share of imports and higher rates on some countries. The details then changed repeatedly, but the policy choice and its author are unambiguous.

In April 2026, Fed economists estimated that tariffs implemented in 2025 had raised core goods prices by 3.1% through February 2026 and lifted the broader core price level by 0.8%. Another Fed study published in June, using actual transactions, found in categories with average exposure prices 1% to 2% higher and spending roughly 4% lower. It concludes that the burden is proportionately heavier on low-income households.

Part of the price increase since 2025 therefore comes from a policy chosen by Trump. This does not prove that a specific dollar of card debt or a 401(k) withdrawal was caused by a tariff. It proves that the administration added measurable pressure to the budgets of households already using credit to live.

The second choice concerns consumer protection. In May 2024, the Biden CFPB had treated certain BNPL lenders as card issuers for statements and billing disputes. On May 12, 2025, under Trump, the Bureau withdrew that interpretation and cited presidential deregulation directives. Federal and state law did not disappear. But the signal is clear: as usage intensifies and one-quarter of users pays late, federal oversight has retreated.

The risk is social before it is systemic

The data do not yet describe a financial crisis comparable to 2008. The flow of card balances into serious delinquency is nearly stable year on year. Hardship withdrawals affect a minority of participants. BNPL use rose only one point. Wealthier households continue to save and spend, supporting the aggregates.

The danger appears when we follow one family rather than the national average. A routine expense is split into instalments. A BNPL debit empties the account and triggers an overdraft. The card pays for the next month at more than 21%. A 401(k) withdrawal covers the emergency but destroys part of future retirement wealth. If income falls or a job disappears, no buffer remains. The risk is not only reduced consumption. It is the conversion of a temporary income shortfall into expensive debt and then a lasting loss of wealth.

This is also why the average US consumer does not exist. Comfortable households keep the averages healthy while distress concentrates elsewhere. “Golden Age” accurately describes the BNPL industry. For fragile households, 2026 looks more like a golden age for products that postpone the bill by two weeks, one month or until retirement.

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Sources

• Federal Reserve, Economic Well-Being of U.S. Households in 2025, Credit chapter, May 2026: matched 2023-2025 card balances, concentration of growth, BNPL use and late payments.
• Federal Reserve Board, Consumer Credit G.19, July 8, 2026: average card rates and revolving credit.
• New York Fed, Household Debt and Credit, Q1 2026, May 12, 2026: $1.252 trillion in card balances and a 7.10% annualised flow into 90-day delinquency.
• New York Fed, Survey of Consumer Expectations, May 2026, June 8, 2026: perceived missed-payment risk and expected income, food and rent growth.
• Vanguard, How America withstands financial hardships, March 2026: hardship withdrawals, frequency, income and reasons.
• IRS, rules and consequences of 401(k) hardship distributions, updated February 26, 2026.
• Fidelity, Q1 2026 Retirement Analysis: saving rates and plan coverage.
• CFPB, The Buy Now, Pay Later Market, December 2025: six lenders, loans per user, 2019-2023 growth and visibility limits.
• Federal Register, withdrawal of the BNPL interpretive rule, May 12, 2025.
• White House, Executive Order 14257 on reciprocal tariffs, April 2, 2025.
• Federal Reserve Board, Detecting Tariff Effects on Consumer Prices in Real Time, Part II, April 8, 2026, and Paying More and Buying Less, June 2026: estimated effects of tariffs on prices and spending.
• BEA, Personal Income and Outlays, June 2026, July 30, 2026: 2.7% PSAVERT personal saving rate.
• Affirm, 10-Q for March 31, 2026, Klarna, Q1 2026 results, Sezzle, Q1 2026 results filed with the SEC: GMV, users and frequency.
• Adobe Analytics, Prime Day 2026: observed online purchases from June 23 to 26, 2026.

Limitations

Data cut off on August 4, 2026. The SHED surveys adults, and its card table covers respondents who allowed data matching. Vanguard and Fidelity describe their own participants, not every US worker. The CFPB’s detailed user-level BNPL data end in 2023. Adobe covers only online purchases observed among its clients. Affirm, Klarna and Sezzle GMV combine different products, countries and accounting rules. The Fed studies identify an effect of tariffs on prices, not a precise share of card debt, BNPL late payments or 401(k) withdrawals. The article therefore separates measured effects, temporal overlap and links that remain unknown.