When it’s time to buy, consumers deserve payment options — and it’s the retailer’s job to make sure they have access to them.  But with high interest rates and late fees, credit cards may not always be the right choice for shoppers. A recent survey led by Sezzle and Retail Dive’s studioID reveals that, for many reasons, consumers are choosing buy now, pay later (BNPL) – also referred to as Pay in 4 – over credit cards as a fair, affordable payment method. Although the shoppers in our survey have access to other payment options (the majority haven’t been denied access to credit in the last three years), they still seek out BNPL.

Here are five reasons why today’s consumers are leaning more on BNPL and less on credit cards.

1. For Better Budgeting and Cash Flow

Responsible purchasing is the biggest driver of BNPL use. Half of consumers use it for easier budgeting and to ensure cash flow.

With flexible and predictable repayment schedules, BNPL is able to provide consumers with greater financial stability as they can match money coming into their accounts with payments. This ensures that cash is available when needed. 

Think of BNPL as another budgeting tool: Consumers can use it to spread out payments so they align with spending patterns and cash flow from week to week or month to month.

In some cases, consumers can even request to defer a BNPL payment on occasion without penalty. “Can you imagine asking a big credit card company to help you out by delaying your payment by a few days, with no questions asked? Do you think they would?" says Nancy Eichler, who joined Sezzle as senior vice president of marketing after spending more than a decade in retail sales leadership. 

2. To Avoid Paying Interest

Using credit cards often means paying interest if you can’t pay the balance in full, or fees when payments are late. According to Transunion, the average consumer’s credit card balance rose from $5,795 in January 2023 to $6,295 in January 2024. Since 2010, credit card issuers have increased credit card late fees every year, reaching $14 billion in 2022 and representing more than 10% of the $130 billion charged to consumers in interest and fees. 

Many BNPL platforms offer consumers zero interest when they make payments on time. It’s no wonder that according to the survey, 32% of consumers use BNPL to avoid paying interest while purchasing what they need. Average credit card interest rates hover around 22.63% currently, compared to 0% interest when consumers use Sezzle and make their payments on time. More than 94% of Sezzle users make payments early or on time.

Certain platform features can also help users avoid overlooking their payments. “One of the things we hear frequently from consumers is how much they appreciate Sezzle’s built-in reminders,” says Eichler. “They get push notifications, texts, and emails, so they receive multiple forms of communication to minimize forgotten payments that could lead to late fees.” 

3. To Reduce Credit Card Use

Some consumers don’t feel comfortable using credit cards, so they seek out other options. This holds true for nearly one in three (28%) survey respondents who rely on BNPL to avoid using credit cards to eliminate concerns about:

• Data breaches

• Incurring debt

• Controlling spending

• Managing large monthly payments

Credit cards also come with spending limits that are determined by the lender. This amount often remains virtually unchanged. 

“With a credit card, once you pay down your $1,000 limit, you return to that same $1,000 credit limit right away, and sometimes it is tempting to spend more than you can afford,” explains Eichler. “Because spending limits can change based on circumstances, BNPLs watch a little more closely — all with the goal of helping consumers better manage their finances. For example, if you struggled to make your last BNPL payment, it’s possible that your spending power could drop temporarily because we don’t want customers to over-extend themselves. The goal is to put parameters in place to facilitate more responsible spending.” 

4. To Avoid Debt Traps

Because BNPL allows consumers to purchase responsibly, they can select a financing option that works — and stick to it — avoiding long-term debt by counting on a structured yet flexible repayment plan. In fact, 27% of respondents use BNPL to do just that.

The vast majority (87%) of surveyed consumers also say they don’t struggle to make their BNPL payments on time: Instead of making “desperate” purchases or spending beyond their means, respondents are clearly making a choice to buy now and pay later – and making it a priority to make payments when they’re due. Interest-free payments and split-payment options available with BNPL help consumers keep debt in check.

The same may not be true if these consumers had to make credit card payments each month. For example, this minimum interest payment calculator from Bankrate shows how quickly interest can create more debt. Consider a $500 balance at 22% interest (the average credit card interest rate), The calculator reveals this: The minimum payment of $15/month would take 52 months to pay off and would result in $279.81 in interest.

5. To Build Credit History

Finally, one-quarter (25%) of surveyed shoppers use BNPL to build their credit history. By reporting an accurate payment history to one of the major credit bureaus, some platforms may help users boost credit scores over time. For example, Sezzle offers an opt-in option: Consumers get to choose whether they want their repayment behaviors reported to credit bureaus.

“This allows a wider group of consumers to build a positive payment history so that, when they apply for credit or a credit card, there’s proof of on-time payments and how long they’ve paid on their accounts,” says Eichler.

BNPL: A powerful purchasing tool

Offering BNPL as a payment option is all about flexibility and empowering consumers to spend responsibly and within their limits.

“By offering BNPL, retailers can help consumers add another active tool to their wallets,” emphasizes Eichler, “and it’s becoming more necessary. If you’re not providing accessibility to your products by allowing consumers to shop using the form of payment and the BNPL platform they choose, then that’s a disservice — not only to the consumer but also to you as a retailer. They don’t get to buy products in the ways that work best for them; meanwhile, you miss out on sales.”

Learn more about how both merchants and consumers can benefit from BNPL.