Small Businesses Are Turning to BNPL to Avoid Paying Credit Card Surcharges, J.D. Power Finds

While credit cards are the most common way small businesses pay for a purchase, a growing number are embracing buy now, pay later loans as a payment option. At the same time, many small businesses are opting not to pay by card in order to avoid a surcharge, finds J.D. Power’s 2025 U.S. Small Business Credit Card Satisfaction Study.

Some 89% of small businesses use credit cards when making a purchase, while 17% say they will use BNPL. The number of small businesses using BNPL increased four percentage points from a year ago. BNPL usage is most frequent among financially unhealthy small businesses, according to the study, with 21% of these small businesses saying they use the short-term financing option, the study says.

J.D. Power, which surveyed 3,728 small businesses from July through September, defines a financially unhealthy business as one having cash or capital constraints or financial vulnerabilities.

Other alternative payments options popular with small businesses include digital wallets (47%), cash (38%), and debit cards (37%).  

Small businesses are attracted to BNPL loans because of the ability to defer payments, low cost, and reasonable repayment terms, John Cabell, managing director of payments intelligence for J.D. Power says by email, adding there are a number of such services on the market.

When it comes to paying a credit card surcharge, 28% of respondents say they have opted not to pay for the purchase using a credit card to save money. Surcharging has become more common among merchants as a way to offset credit card acceptance costs.

“Small businesses are not balking [at paying a surcharge] so much as a large percentage choose to save money and use an alternate payment method rather than pay a fee,” Cabell says. “Directionally, other J.D. Power studies indicate that the percentage of credit card surcharge avoidance is much higher with retail credit card holders, so perhaps businesses are possibly more understanding of these fees.” 

Overall, the satisfaction score for small business credit card holders is 716 on a 1,000-point scale, up eight points from 2024. Reasons for the improved satisfaction level include terms, benefits, and rewards.

Satisfaction scores for financially unhealthy small businesses improved 11 points year-over-year. Reasons for the improvement include availability of card-purchase payment plans, balance transfers, and financial-management benefits and discounts. In addition, 60% of startup businesses fall into the category of financially unhealthy and are also using their cards as a tool to help fund capital improvements and purchase key supplies, Cabell says

“Small businesses cite earning rewards, ability to track and manage purchases, and security as the top reasons for using credit cards as a preferred payment method,” Cabell adds.

Among card issuers, American Express Co. had the highest satisfaction rating for the fifth consecutive year with a score of 750, followed by Chase with a score of 718.