Retail buy now, pay later transactions not replacing credit cards, study shows

Buy now pay later and point of sale options are allowing consumers to spread out their payments on many purchases, but a new TransUnion study shows it is not replacing credit cards. (iStock)

The new buy now, pay later (BNPL) and point of sale (POS) financing options — which allow shoppers to pay for purchases through agreed-upon monthly installments — are rising in popularity and have grown into a $100 billion industry, according to reports.

But despite this growth, a new TransUnion study shows these options are not taking market share from other traditional lines of credit, such as credit cards.

"Consumers who may utilize point-of-sale financing are not doing so at the expense of traditional credit," Liz Pagel, TransUnion senior vice president of consumer lending, said. "We saw consumers who have applied for POS financing building balances on bank and retail cards, and applying for new credit at higher levels than the general credit population. 

"These new forms of financing are growing the credit pie – opening up more opportunities for both consumers and lenders," Pagel said. "Consumers are looking for new ways to finance purchases and the convenience and budgeting POS offerings provide are driving them to finance more, larger purchases."

If you're looking for a line of credit, use an online marketplace like Credible to compare multiple credit cards and choose the one with the best terms and benefits for you.

Younger generations most likely to use BNPL, POS

New credit options like BNPL and POS are most popular among younger generations, the TransUnion report showed. Gen Z and younger Millennials, or those ages 18 to 30, were the largest users at 32%. When adding older Millennials and younger Gen Xers, those ages 18 to 50 made up 78% of all financing applicants. However, this does not appear to have impacted their usage of other forms of credit.

"POS financing applicants also were more likely to have a greater number of cards in their wallet in comparison to the general credit active population," the TransUnion study explained. "Card utilization levels, however, were very similar across risk tiers, with most consumers having open-to-buy available on their cards. This suggests that consumers are actively seeking POS financing even when they could have put the purchase on a card."

If you're looking for the best credit card option for you, visit the Credible marketplace to fill out your information and see what’s available.

What is the best credit option for me?

When looking at credit options, there are several ways to secure money, and it's important to determine what option works best for you. Here are a few to consider:

Buy now, pay later

Buy now, pay later often occurs at the time of checkout and allows shoppers to break down their total into pre-determined monthly payment amounts. To use this option, shoppers go through a fast approval process that includes running a soft credit check to confirm eligibility and check for positive payment history to help determine the installments plan.

Typically, if you make on-time payments, there won’t be an added interest fee. However, if buyers take longer to make payments than what was previously agreed upon, they could see steep interest amounts similar to credit cards with an annual percentage rate (APR) of up to 30%. The buy now, pay later option is good for buying a single purchase at a given store. 

Credit cards

There are credit cards for every need type, including travel cards, balance transfer cards, student credit cards or rewards credit cards. Depending on a borrower’s individual needs, they can choose the card that best fits them. Visit Credible to compare credit card issuers and get prequalified in minutes without affecting your credit score.

Personal loans

If you are looking for a larger loan amount rather than a revolving credit line, a personal loan might be the best choice for you. With today’s low interest rates, a personal loan can be a good option for home improvement or even to consolidate debt from other high-interest rate accounts. Visit Credible to speak to a personal loan expert and get your questions answered.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at and your question might be answered by Credible in our Money Expert column.