Buy Now, Pay Later: The Silent Debt Trap Putting 1 in 4 Users in Financial Peril

BNPL schemes lure shoppers with instant gratification—but the fine print cuts deeper than a Black Friday impulse buy.

The ticking time bomb in your cart

Zero-interest promises mask a dangerous truth: nearly 25% of users miss payments, triggering fees that'd make a payday lender blush. No credit check? That's not innovation—it's a loophole dressed in fintech buzzwords.

Why your 'smart' purchase isn't

Algorithmic underwriting bypasses traditional safeguards, turning Klarna into the new subprime. When four-click checkout meets human psychology, even 'responsible' spenders get ambushed by compounding debt.

The cynical truth

Wall Street repackaged layaway as disruption—now they're shorting the very consumers fueling their ATH profits. How very meta.

Key Takeaways

• Nearly one in four Americans said they had used a BNPL service in the last 12 months, according to a recent Financial Industry Regulatory Authority (FINRA) study.
• Among BNPL users, a quarter use it for groceries—a dramatic increase over last year—and about 40% have missed payments.
• BNPL users are more likely to engage in other "fee-generating" activities, the study said, such as only paying the minimum balance on their credit cards. 
• Consumers often take out multiple BNPL loans at a time, a phenomenon called "debt stacking."

BNPL's Shift Into Everyday Essentials

Unlike traditional personal loans or credit cards, which typically involve credit checks, interest charges, and monthly payments, BNPL services allow consumers to split purchases into smaller installments, often with no interest if paid on time and with fewer credit requirements.

BNPL users tend to be younger, but they aren't necessarily lower-income, FINRA found. Among respondents who say they've used a BNPL service, the percentage of respondents who earn less than $25,000 is about the same as those who make $75,000 or more.

However, according to a July Lending Tree survey, BNPL is not just being used for bigger ticket items, with 25% of BNPL users saying they've used it to buy groceries, up from 14% just a year ago. That indicates that many users live paycheck-to-paycheck and rely on these services for basic needs. While groceries were the fourth-most common BNPL purchase type for younger adults (behind clothing, technology, and home decor), 16% of BNPL users say they've already used it for food deliveries or takeout.

Rod Griffin, senior director of public education and advocacy at Experian, said consumers who turn to BNPL often have several loans out at one time.

“That one pair of shoes may not be a big deal, but if you have five or 10 of them, now instead of talking $100, you're talking $1,000. Now it's an issue," Griffin said.

'Deck Stacking' and Other Issues Facing BNPL Users

BNPL “can be another tool if used well, but [consumers] can get you in trouble pretty quickly. Debt stacking is an issue." Griffin said. The Lending Tree survey backs up Griffin on this point. Three out of every five (60%) BNPL users say they've had multiple BNPL loans out at a time, including 23% who have held three or more, with younger users particularly prone to this behavior. More than four in 10 (41%) BNPL users said they've been late on payments in the past year, up from 34% just a year ago.

Perhaps most concerning is the widespread misconception about credit benefits: 62% of BNPL users said their on-time payments help their credit score. BNPL payments don't, in fact, impact your credit score right now, although that could change. In addition, BNPL often comes with fees for late or missed payments, and unpaid BNPL loans can be sent to collections, which does show up on credit reports.

Tip

Before taking on any BNPL loan, assess whether you can afford the payments without compromising your other obligations, and resist the temptation to juggle multiple loans at once.

The Bottom Line

With BNPL increasingly used for groceries and everyday expenses, the data suggests people are borrowing this way for more than payment flexibility and savings on interest. The risky practice of "debt stacking" could mean many consumers are taking on more debt than they can handle, while many misunderstand how it affects their credit reports.