Buy now, pay later platforms like Klarna, Afterpay and Affirm offer users a nearly frictionless way to spread out a payment. Essentially, they offer interest-free loans to buy anything from a pricey pair of shoes to a plane ticket. 

Research from the Boston Federal Reserve adds to the picture of who’s using those services: Disproportionately it’s women, Black and Latino consumers and those with a rocky financial history. 

So are these services filling a credit gap? Or setting up already-vulnerable consumers to get in over their heads? 

Buy now, pay later loans are a growing but still pretty niche credit product. Economist Joanna Stavins with the Boston Fed said fewer than 10% of consumers use them.

But those who do “tend to be what we call financially fragile,” she said.

Stavins found they carry more debt and have less money in the bank. A below-average credit score is the strongest predictor of buy now, pay later borrowing. 

“It is a convenient alternative for consumers who might not have a credit card,” she said.

Or, more often, consumers who are already burdened with revolving credit card debt or bumping up against a low credit limit. 

“If you have a low credit score, it’s especially valuable to you,” said Raj Date, managing partner of financial services firm Fenway Summer. 

He said buy now, pay later can be a productive tool. Particularly during a time of rising prices and high interest rates. 

Let’s say your wife’s birthday is this weekend. “You sort of forgot to buy something for her — not speaking from personal experience, of course,” Date said. But you’re already carrying an expensive credit card balance. Your paycheck’s not due for another week. 

Services like Klarna and Afterpay offer flexibility, “to buy something you otherwise could not afford without paying interest on your credit card,” he said.

But most borrowers aren’t treating these services like a backstop, said Jennifer Chien, a senior policy counsel on the Financial Fairness team at Consumer Reports. 

“A lot of the business model is designed and promoted as very rapid approval,” she said.

Rapid and frictionless, with little assessment of borrowers’ ability to repay. 

And with so many buy now, pay later platforms, it’s “very easy to lose track, take out too many loans and then you run into issues with missing payments,” Chien said.

Without stricter regulations, she said, one borrower’s loan management tool is another borrower’s debt spiral.