The New Face of Credit is the Debit Card

About sixty years ago, credit cards changed shopping by solving a simple problem: they let people buy now and pay later anywhere the cards were accepted.

In the decades that followed, issuers layered on convenience, security and the lure of points, cash back and perks to drive the flywheel of use, adoption and merchant acceptance. Today, credit cards are the most widely-used financial product in the U.S., powering $5.2 trillion in retail sales in 2024. Currently 82% of Americans own a credit card. Their use still grows, even as newer payment tools emerge.

Although the credit card value proposition still works for many, it no longer works in every situation.

Consumers are showing us that the future of credit is not only about access to a revolving line with a fixed credit limit. It is about giving them the flexibility to pay later at their pace with predicable payment terms.

Sometimes it’s pay right now with funds on hand. Sometimes it’s pay in three, four, five, six, twelve or even twenty-four equal payments. Even if many of those consumers have other credit products they could whip out and use to make a purchase.

Increasingly, that also means using alternative pay-later options for everyday purchases. Whether that’s groceries, a big utility bill, back-to-school supplies, kids’ sports equipment, birthday presents or a last-minute plane ticket to visit family or friends, consumers want to choose the repayment plan that works for them, in that moment.

It’s an approach to credit that puts control in the hands of the consumer. And has become the great and growing consumer appeal of card installments and BNPL options.

The most important credential that has emerged for enabling payment and purchase flexibility is not a new type of credit card.

It’s the debit card.

And it’s not rewards that drive consumer use and adoption of those alternatives.

It’s targeted offers and deals that put real money in the pockets of consumers every time they buy, embedded into the apps that those alternative credit providers provide.

Consumers Rewrite the Credit Playbook in Real Time

PYMNTS Intelligence has been tracking the consumer use of BNPL and installment products since 2020. We’ve seen the category grow from 15% of the population giving BNPL a test drive in 2020 to 70% of U.S. consumers using a pay-later solution in the last three months, according to a recent PYMNTS Intelligence study.

Data reflecting a PYMNTS Intelligence study of 8,250 consumers from March 25 to May 22, 2025 finds that six in ten consumers used one such alternative pay later product in the last year. Forty percent of BNPL users and 44% of credit card installment users say they have increased their use over the past 12 months. By comparison, regular credit card use grew 30% over that same period.

Users say the main appeal of this new pay-later category is predictability. A purchase divided into four or six or twelve or twenty-four equal payments becomes a known quantity. That pay-later-and-at-any-pace structure is appealing to anyone managing a tight or unpredictable budget. That would be many of the roughly 68% of U.S. consumers who report living paycheck to paycheck.

Read more: New Reality Check: The Paycheck-to-Paycheck Report

Thirty-five percent of BNPL or installment payment users cited scheduling flexibility as the main reason.  Thirty-four percent cited control over monthly payment size. These responses far outpaced rewards or interest savings as an incentive. Access to a predictable way to pay was reward enough.

The Pay-Later Personas

Parents are installment and BNPL super-users.

Nearly half used these alternative pay-later plans in the past three months, and almost the same share said their usage has grown in the past year. People with kids use them to manage their growing list of expenses, from food and transportation to school activities and family vacations. PYMNTS Intelligence data shows parents spend more per transaction when they use non-traditional credit options. For families juggling multiple financial priorities, installments turn larger essential purchases into fixed, short-term commitments that fit into a monthly budget.

Households living paycheck to paycheck tell a similar story.

Sixty-five percent of those who struggle to pay monthly bills used BNPL last year. So did nearly six in ten of those who live paycheck-to-paycheck but meet their monthly financial obligations. These consumers see more of their paychecks eaten up by increases in housing, grocery and insurance expenses. Splitting a $300 unexpected medical bill or a $400 utility expense across a few pay cycles makes it manageable without taking on revolving debt, borrowing from family or friends, or worse. For these households, installments provide structure and stability amid irregular incomes and rising fixed costs.

That is especially true for Gen Z and Millennials with incomes from side hustles, highlighting the need for credit options that match repayment to cash flow.

Read also: Inflation and Rising Debt Force Consumers to Double Down on Side Hustles

What might surprise some is that higher-income consumers are just as enthusiastic, even though they have a wallet full of cards. And use them.

Eighty-two percent of those earning more than $100,000 used an alternative pay-later product in the past three months, compared to just over half of those earning less than $50,000. These high earners also spend nearly 40 percent more per BNPL transaction. They can pay in full or use other credit card products but choose not to. Keeping credit lines open for emergencies or unplanned high-ticket purchases is a driver. And like everyone else, they want to manage household liquidity with set repayment terms and payback periods for some of their purchases.

One of the most debated uses of BNPL is for groceries. Critics say that “financing” essentials like food signals financial distress. As I wrote in an article this time last year, that criticism misses the point.

Read more: Who Uses Credit to Buy Groceries? The Answer Might Surprise You

Paying for groceries with BNPL is no different than putting those purchases on a credit card and paying off the balance a few weeks later. Millions of Americans do that for the rewards. The difference is transparency. BNPL sets repayment terms upfront and divides the cost into clear payments. Credit cards allow balances to carry indefinitely, with interest compounding every month if consumers revolve.

More than half of consumers have used BNPL to pay for groceries, including high-income households. It is a growing category of everyday spend that consumers use alternative credit options to pay. It’s a budgeting tool, and for most, a way to discipline their use of credit, and therefore a responsible consumer choice.

At $175 billion, pay-later volume, including BNPL, is a rounding error when compared to credit cards. But consumers are starting to shift more of their spend to these credit alternatives to help plan around their paychecks.

That’s how the debit card is getting its modern-day makeover.

How the Debit Card Became the New Credit Credential

The debit card was never supposed to be exciting. It replaced the paper check as the household financial workhorse tied to a bank account that received deposits, including the consumer’s paycheck. A safe, boring way to pay for everyday expenses at a merchant, with the funds on hand in that account. It was the antithesis of credit.

And until recently, that was the entire point.

Then came BNPL.

Early innovators saw an opportunity wrapped around a new business model. They could create a credit‑like product for younger consumers who lacked access to traditional credit or who didn’t want it. It looked like debit because it used only funds on hand in a bank account, but it acted like credit by letting shoppers pay for a $100 or $200 purchase in three or four predictable installments. Funds on hand became a kind of short-term, small dollar credit line.

Today, that use case has gone mainstream and to a broader audience in need of a transactional credit option. Klarna, Affirm, Sezzle, Afterpay and more recently, a growing number of banks, have turned the concept of a plain vanilla debit card into one card, one credential with multiple ways to pay at a pace set by the consumer.

Affirm reports its gross debit card spend has more than doubled in the last year. The average income of its user is roughly $74,000. The categories that drive most of that spend are groceries. In addition, year over year, travel and ticketing spending grew by 56% and general merchandise spending surged 41%.

Read more: Affirm’s Levchin Sees Company Becoming the American Express of Buy Now, Pay Later

Klarna is piloting a Visa debit card in the U.S. that bakes in BNPL, cashback tiers and rewards. Sezzle now offers Pay-in-Five in addition to Pay-in-Three and Four.

Chase is testing Pay-in-4 on its debit card for purchases between $50 and $400. US Bank is too.

Debit BNPL is inclusive, serving those who can’t or won’t get a credit card. And as BNPL spreads into groceries, travel and everyday purchases, debit cards that double as pay-later products are starting to look like the best of both worlds to many consumers.

More interesting, perhaps, is what’s happening under the hood to take debit next level.

Affirm is partnering with FIS to turn any bank-issued debit card into a pay-later instrument. For smaller banks and credit unions, this is the short-term, small-dollar credit shot in the arm they need using a product their accountholders already have. Affirm steps in as the pay-later rail, underwriting the risk and opening access to its 358,000-merchant network and merchant-funded promotional financing to incent use and adoption.

A new breed of “smart credentials” like Visa’s Flex and Mastercard’s One will let consumers set rules for how they want to pay using a single PAN riding debit rails. Spend under $50? Run it as traditional debit paying now with funds on hand. Spend more than $100? Split it over four payments. More than that? Use a longer set of repayment options.

Merchant‑specific rules, defaulting to debit for groceries but installments for travel or larger discretionary buys, promise to add more definition and specificity. In all cases, the consumer sets the parameters, and the issuer processor routes the payment automatically according to those parameters.

According to a joint study between Visa DPS and PYMNTS Intelligence, more than one-third of all issuers show interest in exploring the feasibility of Flex credentials for their accountholders.

Read more: The Best-In-Class Modern Card Issuer: Driving Customer Lifetime Value Through Innovation

The appeal for consumers is obvious.

For banks, this trend is both an opportunity and a risk. For smaller banks and credit unions that are not credit card issuers, this can make them more competitive with a product their customers want and use. It also gives them a chance to woo and win younger consumers for whom this payment option is very appealing.

Large credit card issuers face a different challenge. They must meet growing demand for these products, especially from younger consumers, while protecting their top-of-wallet status and interchange revenue. If they turn debit into a credit product, they risk cannibalizing their own credit cards for some transactions, at the same time they need to revise their underwriting models. If they don’t, they risk losing those transactions to FinTechs and brands that embed these products into their apps and checkouts.

More fundamentally, traditional issuers can no longer bank on rewards points alone to keep consumers interested in the products that built their credit portfolios over the last six decades.

Are Media Networks Credit’s Next Big Thing?

Cashback is the most popular card perk, as consumers value saving money on the purchases they just made. Attempts by issuers to link offers and promotions to cards have largely fallen flat. Over the years, card-linked offers have gotten a bad rap for things like serving offers to buy hot dogs to consumers who are vegan.

Most of the time, these offers are generic, one-size-fits-all for everyone. Although users of premium credit cards utilize card-linked offers at high rates, 48% of consumers have yet to either take the bait or see them as a perk that keeps them sticky.

But the rise of browser extensions, the never-ending series of deal days, and new business models that link brand incentives to purchases are changing the shopping and payment landscape. And shaping how consumers assign value to payment products. In an environment where things cost 26% more than they did in 2022, consumers are starting to care more about how they might save $10 now than earn $3.50 in cash applied to their card when the transaction clears.

The recent Amazon Prime/Walmart+ Deal Days only amplified that point. Sixty percent of consumers who shopped both said that price, not brand, was why they showed up and bought.

Read more: Speed Versus Spend: Who Shopped Amazon and Walmart’s Deal Days and Why

Klarna, Sezzle, Afterpay and Affirm figured this out early because they had to. Their shopping apps are now commerce marketplaces where brands compete for consumers, some even with exclusive brand deals. Those deals are the foundation for building a bigger retail media network. Shoppers open the apps to browse offers, compare prices and see which brands want their business before deciding what to buy and how to pay. These BNPL players have evolved into commerce platforms, not just lenders, by giving consumers a reason to start their purchase journey in their apps.

Amazon has been doing it for years. With  600 to 620 million products in its marketplace, Prime customer base, rich consumer data and expanding portfolio of BNPL options  every purchase is an opportunity to serve up the right deal to the right shopper at the right time. Amazon is not just where people go to buy, sometimes even multiple times a day. It is also where merchants increasingly pay to be discovered and where consumers find value instantly.

Walmart has the chance to prove they can blend pay later at any pace with deals and promotions at scale with its One Pay debit product.

The One Pay app ties together 100 million weekly Walmart shoppers with its physical stores, eCommerce platform and a growing suite of credit and installment options. Walmart reports three million One Pay members since its launch in January 2021 and added Klarna as a BNPL option in March of 2025. The One Pay app ties together 100 million weekly Walmart shoppers with its physical stores, eCommerce platform and an expanded suite of credit and installment options with Synchrony, which will launch in the fall of 2025. Consumers can get instant offers and decide how to pay without leaving Walmart’s ecosystem.

Read more: Retail Edge Drove Walmart, PayPal Partnerships and Amazon BNPL Deal, Says Synchrony CFO

That is the new competitive set for banks. Debit rewards died with Durbin, and BNPL players never had the economics to offer traditional cash back. So, they built shopping ecosystems and merchant-funded networks to create differentiation. Shopping apps became destinations and consumers got deals and flexible repayment terms rather than delayed rewards.

Chase has seen the writing on the wall. Its new retail media network signals that it knows what its BNPL competitors have understood for years. But Chase’s card-linked offers still feel dated. They live inside app menus or in emails that are easy to ignore. They lack the immediacy and personalization that make BNPL shopping apps so powerful.

Plus, no one thinks to start their shopping journey in their banking app.

What’s Next

What began as a workaround for the credit-averse has become the blueprint for how people want to pay. Debit, reimagined as a credit-lite alternative, could redefine what “paying with plastic” means in the decade ahead. A card that can act like credit without credit checks or interest fees is a powerful proposition. Add the ability for consumers to set rules and let the credential decide the best way to pay for larger purchases, and it starts to look like the future of credit.

Simple, flexible and entirely on the consumer’s terms.

BNPL players have already earned consumer trust for those who use it by making this vision real. Their shopping apps have become marketplaces, giving brands a direct path to consumers and embedding smart credentials into checkout. The next competitive wave will come from AI-powered agents and smart tokens that know spending patterns, obligations and available offers. They will recommend the best way to pay and the payback period, apply the most valuable deal and route the transaction to the right credential in real time.

Banks should own this future. They already have consumer trust, regulatory authority, risk expertise and balance sheets big enough to reimagine credit as something flexible and relevant. The opportunity is to combine those strengths with tools that consumers have shown they want to use.

The irony is that large credit card issuers, who have nurtured and owned the debit relationship for more than thirty years, now risk losing it to players who saw its true potential first. They can seize this moment or watch others take it from them.

How do you see it?

Until NEXT time.

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