Buy Now, Pay Later Use Among Homeowners: New Findings

A JPMorgan Chase Institute analysis finds that many mortgage holders lean on pay-over-time options when cash is tight or credit card limits are near, with patterns most pronounced among current borrowers and people preparing to buy their first home.

Key Findings: Homeowners Turn to Pay-Later Options Under Pressure

• When credit cards are maxed or budgets are strained, many homeowners pivot to pay-later options, according to research from the JPMorgan Chase Institute, an economic think tank backed by the largest American bank.
• The study, released March 3, combined anonymized bank transactions with credit bureau data covering millions of households over multiple years and found that mortgage payers and prospective first-time buyers are most likely to use pay-over-time plans under financial stress.
• Makada Henry-Nickie, the institute’s housing finance research director, said these consumers tend to treat pay-over-time plans as a liquidity release valve rather than a simple convenience feature.

Deeper Insight: Cash-Flow Stress, Pay in 4, and Shifts in Payment Method

Researchers built a cash-flow measure to assess how stretched homeowners are. Reviewing spending and borrowing for roughly 4.5 million mortgage holders, they concluded that pay-over-time usage peaks during months when discretionary cash is scarce after essentials and other debts are paid, the summary noted.

The team tracked payment behavior from 2019 through 2023, focusing on classic pay in 4 installment plans—typically interest-free and settled within weeks.

Because mortgages are large and difficult to adjust, the analysis examined how borrowers use these plans to smooth monthly payments over time. A 10% decline in deposits corresponded with a 1.5% increase in annual pay-over-time outlays among Federal Housing Administration borrowers.

Among financially pressured homeowners and first-time buyers, reliance on pay-later services rose while credit card usage declined.

In the year before a first home purchase, frequent card users reduced card spending by about 12% to 13%, the report found.

Meanwhile, among heavy pay-over-time users, spending through these checkout loans climbed roughly 34% to 38% in the 12 months leading up to a home purchase.

Henry-Nickie noted that these pay-over-time transactions also grow as a share of total spending during that period.

Still, she emphasized that pay-later tools do not always replace cards; some customers use them for convenience, while others turn to them when card eligibility or available credit is limited.

JPMorgan Chase Institute President Chris Wheat added that first-time use is more likely when households have little surplus cash.

The study excluded longer-term, interest-bearing installment products to avoid mixing day-to-day purchases with financing choices tied to interest rates and loan duration.

The Financial Technology Association, which represents buy now, pay later providers and users, pushed back on parts of the analysis, citing Consumer Financial Protection Bureau research indicating that 98% of users pay off these loans completely. “It should not be surprising that people across income levels—especially those with less disposable income—choose lower-cost payment plans,” spokesperson Miranda Margowsky said by email.

• No revolving balances.
• No hidden late fees.
• Fixed due dates.
• Predictable installments.
• Used responsibly in-store and online.

Pay-over-time plans work best when borrowers treat them like any other bill: planned for in advance, tracked carefully, and paid on time.

Researchers said the study’s goal is to inform policymakers as they consider rules for the sector.

Henry-Nickie added that similar usage patterns appear beyond mortgage borrowers in the institute’s broader datasets.

Other scholarship has flagged risks: A Johns Hopkins University paper published in December linked pay-over-time spending to poorer mental health, though industry groups disputed those conclusions.

Government agencies are assessing how pay-later options affect homeowners.

In June, the Department of Housing and Urban Development requested public comment, posing nearly two dozen questions about how pay-over-time plans influence borrowers’ overall finances, on-time housing payments, and broader market stability.

In practice, pay-later services usually operate at checkout: a shopper selects an installment option, completes a short application or verification, and agrees to a repayment schedule that draws from a linked debit card, credit card, or bank account.

• Choose the installment option at checkout online or in-store.
• Complete identity and payment verification, which may include a credit check or a non-credit risk review.
• Pay the first installment at purchase, in many plans.
• Make the remaining payments automatically on set due dates until the balance is cleared.

Whether these plans affect a credit score depends on the provider and the product. Some plans are not routinely reported to credit bureaus, while others may be reported, especially when a consumer misses payments, defaults, or the account is sent to collections.

“Best” is often a matter of fit rather than a single winner, and shoppers commonly compare providers such as Affirm, Klarna, Afterpay, PayPal Pay in 4, Zip, and Sezzle based on total cost, transparency, repayment flexibility, merchant availability, customer support, and how (or whether) activity is reported to credit bureaus.

Approval can vary by purchase amount and a shopper’s history with the provider. Services that are often seen as easier to qualify for tend to rely on quick identity checks and account signals such as a valid payment method, consistent repayment history, and a low level of existing open pay-over-time commitments.

Some pay-later apps advertise that they do not require a hard credit inquiry for many transactions, instead using alternative risk checks. Even so, eligibility can still depend on factors such as account standing, recent missed payments, linked payment method quality, and purchase details.

For someone trying to access $500 quickly, the fastest route is often to use a pay-over-time plan for a roughly $500 purchase at a participating merchant rather than expecting cash in hand. If the goal is a $500 cash shortfall, alternatives can include a credit card cash advance, a bank small-dollar loan, a paycheck advance product, or a personal line of credit, with “instant” timing typically dependent on identity verification and whether the funds can be delivered to an existing account or debit card.

Some credit and charge cards also offer installment features that let cardholders split eligible purchases into fixed payments, either at the time of purchase or after the purchase posts. Examples include American Express Plan It, My Chase Plan, and Citi Flex Pay, which generally convert qualifying charges into installments with a fee or interest terms that vary by issuer and offer.

Potential advantages of using pay-over-time plans include the ability to spread costs across pay periods, clearer payment schedules than revolving credit for some users, and low or no interest in certain short-term promotions.

Potential disadvantages and risks include stacking multiple plans and losing track of due dates, late fees or other penalties when payments are missed, account restrictions after delinquencies, and the possibility of credit consequences if activity is reported or a default escalates.

Common alternatives include using a traditional credit card (including a promotional low-rate offer), applying for a small personal loan, using layaway when available, seeking retailer financing with clear terms, building a savings buffer for planned purchases, or adjusting the timing of nonessential spending to reduce reliance on short-term borrowing.