America’s Newest Wealth Killer No One Is Talking About

America’s Newest Wealth Killer No One Is Talking About

America’s newest wealth killer, which almost no one is talking about, is the “Buy Now, Pay Later” (BNPL) installment payment plan. These plans are marketed as a convenient way to make purchases more affordable by breaking down payments into smaller, manageable amounts. However, they can lead to significant financial pitfalls for consumers.

“Buy Now, Pay Later” services are causing Americans to incur over $24 billion in debt. These services are particularly insidious because they make it easier for consumers to spend money they don’t have, often leading to impulse purchases and a lack of awareness about the actual cost of their spending. Even essential purchases like groceries and utilities are being financed through BNPL, which can exacerbate financial strain and lead to a cycle of debt. 

The Allure of Buy Now, Pay Later: How It’s Marketed as a Better Option

Buy Now, Pay Later (BNPL) services have taken the retail world by storm, enticing consumers with the promise of convenience and affordability. These short-term financing options allow shoppers to make purchases and pay for them over time, often with no interest.

Buy Now, Pay Later (BNPL) loans can have interest, depending on the specific plan and provider. Here are the critical points regarding interest and fees associated with BNPL loans:

  1. Interest-Free Plans: Many BNPL plans, especially the famous “pay-in-four” models, do not charge interest as long as payments are made on time. These plans typically split the purchase amount into four equal installments, with the first payment due at checkout and the remaining payments due every two weeks.
  2. Interest-Bearing Plans: Some BNPL providers offer longer-term plans that can carry interest rates. These interest rates can vary significantly, ranging from around 9.99% to as high as 36% APR, depending on the provider and the length of the repayment period. For example, PayPal’s Pay Monthly plan can charge interest rates between 9.99% and 35.99%.
  3. Late Fees and Other Charges: While many BNPL loans do not charge interest, they often impose late fees if payments are not made on time. These late fees vary by provider but are typically around $7 to $8 per missed payment. Additionally, some plans may have other fees, such as convenience fees or fees for rescheduling payments.
  4. Credit Impact: BNPL loans generally do not affect your credit score unless you miss payments. However, some providers may perform a soft credit check during the application process, which does not impact your credit score.

While many BNPL loans are interest-free if paid on time, longer-term plans can carry significant interest rates. It is crucial to read the terms and conditions of each BNPL plan carefully to understand any potential interest charges.

BNPL companies use clever marketing tactics to position their services as a better alternative to traditional credit cards or loans. Taglines such as “Shop now, pay better,” “Pay at your own pace,” and “Get financial breathing room” suggest a sense of freedom and flexibility. However, these catchy slogans can be misleading, trapping unsuspecting consumers in a cycle of debt.

The Hidden Costs: Late Fees, High Interest Rates, and Damaged Credit

While BNPL services often advertise no interest and easy approvals, hidden costs can catch consumers off guard. Missing a payment can result in late fees, which can add up quickly. Some BNPL providers charge interest rates as high as 36% for late payments, further compounding the financial burden.

Late or missed payments can also negatively impact credit scores and credit history, making it harder for consumers to access affordable credit in the future. Unlike traditional credit cards, BNPL loans generally don’t help build credit, leaving users with little to gain and much to lose.

Drowning in Debt: Americans Owe Over $24 Billion in BNPL Loans.

The popularity of BNPL services has skyrocketed in recent years, with Americans now owing a staggering $24 billion in BNPL loans. According to a Consumer Financial Protection Bureau (CFPB) report, BNPL loans originating in the US grew from 16.8 million in 2019 to 180 million in 2021, to $24 billion by 2023.

This rapid growth has seen BNPL expand beyond its traditional domains of apparel and beauty, now encompassing essentials like groceries, gas, and even pet care. As more consumers turn to BNPL for everyday purchases, the potential for financial harm increases.

BNPL Companies Cash In Boosting Sales at the Expense of Consumers

BNPL companies have been quick to boast about their ability to increase consumer spending and basket sizes, making them an attractive partner for retailers. Afterpay, a popular BNPL provider, claims that shoppers who use their service spend 40% more than those who don’t.

Other companies report similar figures, with Klarna touting a 41% boost in average order price and Affirm boasting a 60% increase in upgrades, bundling, and add-ons. While these numbers may be music to retailers’ ears, they highlight how BNPL encourages overspending, often at the expense of the consumer’s financial well-being.

Regret and Financial Strain: The Aftermath of BNPL Purchases

The aftermath of BNPL purchases can be filled with regret and financial strain. Studies have found that half of BNPL customers regret their purchases, with many admitting to buying items they couldn’t afford.

A third of users reported skipping or delaying necessary bills to make their BNPL payments, indicating a significant financial burden. To make matters worse, BNPL companies often use customer data to target users with more debt products, perpetuating a cycle of borrowing and economic stress.

Financing Essentials: When BNPL Becomes a Necessity, Not a Luxury

One of the most concerning trends in the BNPL space is the growing use of these services for essential purchases like groceries and utilities. This shift suggests that many consumers turn to BNPL out of financial necessity rather than convenience.

Relying on short-term financing for basic needs can have severe long-term consequences, trapping individuals and families in debt and financial vulnerability. This trend highlights the urgent need for better financial education and support to help consumers make informed decisions and avoid falling into the BNPL trap.

The Psychology of Spending: How BNPL Numbs You to the True Cost

BNPL services capitalize on the psychology of spending, making it easier for consumers to part with their money. By breaking down purchases into smaller, more manageable payments, BNPL numbs users to the actual cost of their spending.

This “I want it now” mentality encourages impulse buying and overspending, as the full financial impact is hidden behind a veil of installments. As a result, consumers may find themselves saddled with more debt than they can comfortably afford, leading to financial stress and regret.

Breaking the Cycle: Developing Healthy Money Habits to Avoid the Trap

To avoid falling into the BNPL trap, it is crucial to develop healthy money habits. These include creating and sticking to a budget, saving for large purchases, and resisting the temptation of instant gratification.

Before making a purchase, ask yourself if it’s something you truly need and can afford. If you must use BNPL, understand the terms and conditions, including any late fees or interest charges. Prioritize building an emergency fund to cover unexpected expenses, and focus on living within your means.

The Bottom Line: Why Buying Now and Paying Now Is the Real Better Option

While BNPL may seem attractive, the better choice is to buy now and pay now with the money you already have. This approach provides peace of mind and financial stability, knowing you’re not incurring debt for your purchases.

By saving for the things you want and need, you can enjoy them without the stress of looming payments or the risk of damaging your credit. Embrace the power of delayed gratification and prioritize your long-term financial health over short-term desires.

Spread the Word: Sharing the Dangers of BNPL with Friends and Family

As the popularity of BNPL services continues to grow, it’s essential to spread awareness about their potential dangers. Share this article and your knowledge about the risks of BNPL with friends, family, and colleagues.

Educating others and encouraging them to make informed financial decisions can help prevent unnecessary hardship and debt. Remember, collective action and knowledge sharing are powerful tools in the fight against predatory lending practices and promoting financial wellness.


Buy Now, Pay Later services may seem convenient, but they are quickly becoming America’s newest wealth killer. By understanding the risks, developing healthy money habits, and spreading awareness, we can protect ourselves and others from falling victim to this financial trap. Choose to buy now and pay now, and invest in your long-term financial security.[1] [2]