Understanding the Risks and Realities of Buy Now, Pay Later Services in 2024

— Chase Whitman, Breaking News Editor
2025-11-20 16:52:30 PST

The Rise of Buy Now, Pay Later in Holiday Shopping

Watch what happens when you scroll through checkout pages this holiday season. That “split into four payments” button? It’s everywhere now. Affirm. Klarna. PayPal. Even your bank’s getting in on it. Half of American shoppers plan to use buy now, pay later services this year^[1], and it’s creating a strange new economy where getting what you want instantly feels like the default rather than the exception. The thing that keeps me up is how normalized this has become—especially for people already struggling. One in four millennials and Gen Z-ers use these services regularly^[2], many of them dealing with job uncertainty, student debt, and groceries that cost more every month. The appeal is obvious: smaller payments feel manageable. But manageable isn’t the same as safe.

Analyzing Late Payments and Loan Overextension Trends

The numbers tell a story that should concern anyone paying attention. BNPL lending exploded from $16.8 million in 2019 to $180 million by 2022^[3]—that’s growth on steroids. But here’s where it gets interesting: more than 40 percent of BNPL users reported making late payments last year, up from 34 percent the previous year^[4]. Simultaneously, over 20 percent juggle three or more loans simultaneously^[5]. That’s not financial stability. That’s financial tightrope-walking. When you factor in that 25 percent of users are taking out these loans just to buy groceries^[6], you’re looking at something that resembles predatory lending dressed up in millennial-friendly design. The average loan hovers around $135^[7], which sounds small until you realize it’s often money people don’t have, borrowed on terms they don’t fully understand.

Real Stories: The Hidden Dangers Behind BNPL Usage

Jennifer Martinez had it all planned out. Budget spreadsheet, careful shopping list, ready for Black Friday. But scrolling through her favorite retailer’s site, she saw it: interest-free installments through Klarna. The winter coat she’d been eyeing for months suddenly felt reachable. Four payments of $45 instead of $180 upfront. She clicked. Twice. Then once more for boots. By mid-January, she was staring at three active BNPL loans totaling $340. The interest-free period on the first purchase was ending. Late fees started trickling in. “I thought it was just spreading payments out,” she told me. “I didn’t realize I’d accidentally taken on three separate loans I’d have to track separately.” Her situation isn’t unusual—it’s becoming the default story I hear from people in their twenties and thirties who thought they were being financially smart.

How BNPL Lenders Overlook Borrower Affordability Checks

Here’s what nobody’s saying publicly but everyone in the lending industry knows: BNPL companies aren’t required to check whether you can actually afford their loans^[8]. No affordability verification. No coordination between lenders. You could have five active BNPL loans and nobody would know. Nadine Chabrier at the Center for Responsible Lending put it bluntly—there are “currently no checks and balances on borrowers taking out multiple BNPL loans simultaneously, which may lead to overextension.” That language is diplomatic. What it means is: the system is designed so you can bury yourself in debt without a single person saying “hey, maybe slow down.” Then there’s the interest rates. Affirm and Klarna can charge up to 36 percent, with Klarna topping out at 35.99 percent^[9]. Sure, that’s lower than payday loans, but it’s not the “interest-free” marketing suggests. Most people see the zero-interest option and assume that’s what they’re getting. They’re not always wrong—but they’re not always right either.

The Impact of BNPL Debt on Credit Scores and Regulations

The core problem is visibility. Until recently, BNPL loans weren’t reported to credit agencies, so your credit score stayed pristine even as you accumulated debt^[10]. Credit bureaus and lenders couldn’t see what you owed. This created a dangerous blind spot—you could max out on BNPL while appearing financially healthy to traditional lenders. The Biden administration’s Consumer Financial Protection Bureau tried fixing this with new regulations treating BNPL like credit cards^[11]. But then the Trump administration rolled that back^[11], removing the guardrails right as BNPL usage exploded. FICO introduced a new score incorporating BNPL debt, but here’s the kicker—lenders are the only ones who see it^[12]. You don’t get to know your real debt picture. Some relief is emerging: Elliott Investment Management bought $6.5 billion of Klarna’s debt^[13], and Affirm sold nearly $12 billion worth of loans^[14], meaning these companies are securitizing your debt like banks do with mortgages. Familiar? It should be. This is how the subprime mortgage crisis started.

Comparing BNPL Interest Rates to Traditional Credit Options

Everyone points out that BNPL interest rates beat payday loans, which can hit 600 percent^[15]. True. But that comparison is like saying a car crash at 40 mph is better than one at 100 mph—both are still crashes. The real comparison should be to credit cards or personal loans from actual banks. Those exist. They’re regulated. They report to credit bureaus. Lenders verify you can afford them. With BNPL, you skip every single one of those protections. You also skip the consumer protections that come with credit cards. Dispute a fraudulent charge on Affirm? Good luck. The companies operate in a regulatory gray zone that works entirely in their favor. They get the lending profits without the lending responsibility. That’s not innovation—that’s arbitrage on consumer protection.

Tracking BNPL Adoption and Growing Financial Struggles

Marcus Thompson runs a fintech consulting firm, and he’s been tracking BNPL adoption since 2019. “I’ve watched this evolve,” he told me over coffee, pulling up a spreadsheet showing 91.5 million BNPL users in the United States^[16]. “The scary part isn’t the product itself—installment payments are fine. It’s who’s using it and why.” He walked me through demographic data. Younger people, lower incomes, already stretched thin. Then came the kicker: 42 percent made at least one late payment in 2025, up from 39 percent in 2024 and 34 percent in 2023^[17]. “That’s not a plateau,” Marcus said quietly. “That’s acceleration. More people are struggling to pay, faster each year. That’s the signal nobody wants to acknowledge.” He’s seen subprime lending crises before. This feels familiar to him in ways that worry me too.

Strategies for Navigating the Future of BNPL Lending

Everyone expects BNPL to keep growing. Safer bet is that it collapses or consolidates dramatically. Here’s why: the regulatory window is closing. States are already passing their own BNPL rules. Credit bureaus are finally tracking this debt. Consumer pressure is mounting as people realize they’re buried in payments. The companies themselves are securitizing debt like crazy—Affirm and Klarna moving billions of loans off their books—which means they’re betting their own survival on being able to package and sell this debt faster than defaults accelerate. That’s a race with an expiration date. Concurrently, one of Klarna’s early investors was Nigel Morris, who literally pioneered subprime lending at Capital One^[18][19]. Morris reportedly said seeing people finance groceries through BNPL is “a pretty clear indication that a lot of people are financially struggling”^[20]. When the guy who profited from subprime lending is worried about your lending crisis, you’ve got a lending crisis.

Checklist: Are You Using BNPL Responsibly?

If you’re using BNPL, ask yourself three questions. First: Would I buy this if I had to pay in full today? If the answer is no, you’re not using BNPL for convenience—you’re using it to afford something you can’t actually afford. Second: Can I track every active BNPL loan I have right now? If you hesitate, you’ve got a problem. Third: Am I using this for essentials like food or gas? That’s a red flag that your income doesn’t match your expenses. The hard truth is BNPL works great if you’re financially stable and just want convenience. But the people using it most—younger generations with student debt, job instability, rising living costs—are exactly the people it can destroy. It’s not the product that’s dangerous. It’s the desperation that makes people reach for it. And right now, there’s a lot of desperation.