A financial crisis may be Surpassingbrewing with Buy Now Pay Later, or BNPL, users, a new survey shows. 

Not only do shoppers who use the short-term financing tend to borrow and spend a lot, but they’re having difficulty keeping up with debt payments, according to a survey of 2,223 U.S. adults between Aug. 31 and Sept. 3 by business intelligence firm Morning Consult.

More than two out of five users carry BNPL debt and one-quarter of them missed a payment last month, the survey showed. Another one-quarter said they paid late fees; 27% saw a decline in their credit score;f 22% interacted with a debt collector. 

“If their personal debt situation worsens, these figures could rise, creating real problems for these users at a time when interest rates are already high,” said Morning Consult financial services analyst Jaime Toplin. 

Who are BNPL users? 

Here’s what Morning Consult found: 

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• Young: Thirty-seven percent of Gen Z adults and 32% of millennials said they made a BNPL purchase in August, compared with 16% of Gen Xers and 6% of boomers, Morning Consult said. 
• Well-off: More than one-fifth (21%) of consumers in households earning between $50,000 and $99,999 annually used BNPL last month, and 28% of those earning at least $100,000 did so. The wealthier you are, the more often you use BNPL, too. 
• Tech savvy: They have less access to or are unsatisfied with traditional financial institutions but are attracted to digital banks. 
• Debt-laden: They’re more likely than the average consumer to live in households with higher rates of debt across the board, including medical, credit card, auto, student, mortgage, home equity and personal loan debt. One-third even said they used their credit cards to pay off BNPL loans, “which could create a vicious cycle that’s hard to overcome,” said Toplin of Morning Consult. 
• Credit hungry: Compared with U.S. adults overall, more than twice as many BNPL users said in August their household applied for a new credit card in the past month. 
• Lower credit scores: On average, their credit scores are 50 points lower than non-users, according to Philadelphia Federal Reserve research. 

How does BNPL work? 

Offered mostly by fintechs, BNPL is a type of short-term financing that allows people to buy a good or service and pay for it over several equal installments, without interest and with the first payment usually made at checkout. The most common BNPL plan is four equal payments, which should allow you to pay off your debt in six weeks. 

BNPL use has soared because it’s relatively easy to get approved, allows you to buy items now and delay payments, and isn’t reported to credit bureaus. 

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However, there are risks. Though no interest is charged on the loan, you’ll be charged late fees for missed payments, which can add up quickly, warns the Consumer Financial Protection Bureau.

You may also forfeit consumer protections you would normally get if you used a credit card if the product is defective, is a scam or needs to be returned. Since BNPL isn’t reported to credit bureaus, it’s easy for people to take out loans from different lenders simultaneously or continue to spend and accumulate more debt. 

A debt snowball could put BNPL users’ financial health “on the precipice of a nosedive,” Toplin said. 

Last year, the CFPB said it planned to regulate BNPL firms. 

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.