Live Now, Pay Never

The answer is twofold. High-income consumers are carrying overall spending, while large segments of middle- and lower-income Americans are cutting back and foregoing discretionary purchases.

Many of these purchases aren’t going on a credit card, either. Buy now, pay later is the newest way to dress up credit, with more flexible weekly payments instead of a lump sum credit card payment at the end of the month.

“BNPL” companies like Klarna, Affirm, Afterpay, and Splitit have worked with e-commerce sites to integrate these alternative payment options into popular platforms. And they are smart to do so: The latest research says 26% of Americans are more likely to buy something when a vendor offers BNPL.

It’s no surprise that BNPL options increase consumer spending. Monthly BNPL spending grew an incredible 21% from June 2024 to June 2025.

Normally, I would see this as a mixed signal about the average consumer. People are still making discretionary purchases, but they are less able to afford them.

But delinquencies on BNPL loans are rising. And this week saw a sign that the “buy now, pay later” philosophy may be spreading to more essential purchases.

My anecdotal data point? An ad on Yahoo Finance for a “rent now, pay later” service.

Paying Later Is a Fragile Balance

According to LendingTree, 41% of BNPL users have made at least one late payment in the past year. That’s up from 34% a year ago.

Debt stacking is just as much a problem with “pay later” services as it is with traditional credit cards. 40% of BNPL users have reported having more than one loan at once, with an alarming 23% stating they’ve had three or more active loans.

Traditionally, BNPL companies haven’t reported these loans to the credit bureaus, but Equifax, Experian, and TransUnion are looking to change that. To BNPL lenders, there’s little difference between a responsible consumer and a subprime borrower. What could go wrong?

It gets worse. These loans are increasingly being used for essentials. More users are buying groceries with BNPL loans than ever before—a whopping 25% of all users. That’s up from just 14% last year.

The Shift to Shelter

Housing and groceries are the last expenses people can cut. Borrowing to cover basic needs is a sign of distress. On the other hand, the profit potential is clear for “pay later” companies looking to offer flexible rent payments.

Rent.app offers a service where you can break your monthly rent down into two payments…for a fee of $9.99 plus 1.5% of the total rent amount. Qira lets renters defer even more—up to 75% of their outstanding balance with a fee of at least 1.5% of the amount deferred.

And RNPL Credit, the company I saw an ad for, offers “M-Loans” for renters to move into a place with $0 down at the time of financing. It all sounds familiar, doesn’t it?

Rent prices are cooling off in some of the hottest markets of the past few years. But that doesn’t mean they are affordable for the average American. Sure, wages have certainly grown…but not as much as rent.

Rental costs have consistently outpaced wage growth for the past 50 years:

This widening gap isn’t just a sign of growing housing unaffordability for the average American. Societally speaking, the chart above also shows us inching closer to an inflection point between the haves and the have-nots.

Under Pressure

Rising rent and stagnating wages are causing stress.

In 2023, half of all renting households (about 22.6 million) were cost-burdened, meaning they are spending over 30% of their income on housing costs. Of those, 27% were “severely burdened,” meaning they spend over half of their income on housing costs.

Demographically, this is affecting younger Americans more than anyone else. And the effects are not equal around the country. Metro areas like Tampa, Miami, and Cape Coral in Florida have cost-burdened renter rates of up to 67%.

This is a bad situation. As I was wrapping up my writing, the jobs report hit. Rick Reider of BlackRock was on Bloomberg, giving his take. He said half of US workers are having a hard time.

He added that the housing market is stuck, but the Fed and Treasury have tools at their disposal that could help bring rates down for home borrowers. That would be welcome relief, but it doesn’t solve the overarching problem of disparity. I don’t see this disparity closing anytime soon, either.

When you layer this situation on top of my friend John Mauldin’s work on historic cycles, it reinforces my concern that there will be both amazing opportunities and serious challenges to be faced in the next decade.

As Ben Hunt would say, now is the time to find your pack. The trusted people who can help you navigate the decade ahead. To the extent we are in your pack, I thank you for your support. We’ll continue to do our best for you.

Thanks for reading.

Ed D’Agostino
Publisher & COO

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