Consumers Are Financing Their Groceries. What Does It Say About the Economy?

For some American consumers, “buy now, pay later” loans aren’t just for big-ticket items like televisions and vacations. They’re for groceries, too.

When Tia Hodge, stocked up at her local Kroger in early April, her bill was nearly $400. At checkout, she scanned her app from Klarna, a buy now, pay later company that offers short-term loans. Klarna paid the grocery store for the 71 items in the cart. Mrs. Hodge split her payments to Klarna into four installments of about $100, with zero interest.

“Food prices have skyrocketed,” said Mrs. Hodge, of Austell, Ga., who plans how much she’ll spend on each trip to the grocery store based on her cash flow and other expenses that month, including credit-card debt and student loans. Being able to spread out the payments for groceries has helped her family of four — soon to be five — budget better, she said.

Mrs. Hodge, 29, is hardly alone. Nearly a quarter of consumers using buy now, pay later loans finance groceries, up from 14 percent a year ago, according to a recent LendingTree survey. And it’s not just groceries; more Americans are using these loans to pay for recurring monthly bills, such as electricity, heat, internet and streaming services like Hulu.

Consumers can break up gasoline purchases into installments or pay for the burrito or burger order delivered to their home in bite-size pieces. People are going on social media to share tips on how to use the short-term financing even for rent.

While some borrowers say the loans are a useful way to manage cash flow, others say the increased use of buy now, pay later plans for day-to-day essentials is a troubling sign that more consumers are financially stressed.