Borrowing trends in America are shifting in ways that have economists raising red flags about financial strain and rising delinquencies.
Neither consoles nor furniture, alert in the United States as to why citizens are borrowing from the bank: “It is concerning”
It used to be that Buy Now, Pay Later (BNPL) was for things you wanted, not things you needed. A couch, a PS5, maybe a new laptop. Not anymore... at least not for the masses.
In a sign of how stretched household finances have become, one in four BNPL users now says they’ve used the service to pay for groceries, up from 14% just a year ago. Experts point to high inflation, rising interest rates, and fading pandemic-era support. The rich keeping getting richer though as the gap widens under the Trump administration.
U.S. economy hurts, Americans get hit
The pandemic initially gave many Americans breathing room – stimulus checks, paused loan payments, and less spending helped reduce debt and increase savings. But that cushion is gone. Inflation surged, the Federal Reserve raised interest rates, and debts became costlier to manage. Now, credit card balances, auto loan delinquencies, and defaults are rising, signaling growing financial distress.
Speaking with CNN, chief credit analyst at LendingTree Matt Schulz, said that while loans were traditionally targeted towards things like clothing, gaming consoles and furniture, people are now “using them for something as basic and fundamental as groceries,” adding that “it is certainly concerning.”
The end of the student loan payment pause in late 2024 added further strain. Delinquency rates jumped from 1% to 7.74% after missed payments began hitting credit reports again, per the New York Fed. Many borrowers have seen their credit scores plunge and now face wage garnishment.
Uncertainty and tariffs
Meanwhile, consumer sentiment is near record lows. The University of Michigan’s index has dropped nearly 30% this year as Americans grapple with economic uncertainty, including tariffs and unpredictable policy shifts.
Although income growth and savings improved in April, the wider trend is troubling. When basic expenses like groceries go on payment plans, it’s a clear sign that more Americans are struggling to make ends meet. But where do they point their finger?
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