If you are familiar with online shopping, you may have noticed the proliferation of buy now, pay later options offered at checkout. Companies like Klarna, Afterpay, and Affirm are the biggest names in the BNPL industry, and major credit card companies have seen their success and followed in their footsteps.
BNPL companies offer a lucrative alternative to credit cards for consumers who might not have a long enough credit history or a high enough credit score to be approved for credit cards. Since BNPL companies conduct credit checks using a different method than credit card companies, consumers with short borrowing histories and poor credit scores are able to maintain purchasing power. During the pandemic, use of BNPL services skyrocketed due to lockdown mandates and economic uncertainty. Post-pandemic, BNPL companies have cemented their position in e-commerce, especially amongst younger demographics.
The normalization of what is essentially a glorified payday loan has caused concern for financial experts. BNPL companies market to a younger audience who may not be fully aware of the risks of offloading payments. Using colorful ads and celebrity endorsements, BNPL companies seek to entice consumers with the promise of “four easy payments!” As youtuber Tiffany Ferg aptly states in her overview of BNPL services, “I wouldn’t spend $100 on a palette, but I would gladly spend $25 four times!”
Per the Consumer Financial Protection Bureau, financial experts are not wrong to be concerned. In the CFPB’s 2025 study on BNPL demographics, it was discovered that users of BNPL services were more likely to have taken out multiple loans, have low credit scores, and have higher balances on credit cards and other such unsecured loans. Investigative research by the Wall Street Journal shows that BNPL companies are exempt from the Truth in Lending Act due to their four installment payment plans. The Truth in Lending Act requires lenders to be upfront about charges and provides consumers with protection from shady lender tactics. Todd Baker, a financial tech expert and lecturer at Columbia University, tells the WSJ that “the product [BNPL] was structured essentially, to avoid the application of the Truth in Lending Act.”
While BNPL companies have not yet been caught committing fraud or other illegal activities, the threat they pose to consumers is one of complacency. BNPL encourages consumers to buy more even when they are not able to, punishing those unable to make payments in time with fees. Since using a BNPL service doesn’t require a credit check, users cannot increase their credit score with timely payments. However, missing payments can cause the balance to be sent to a collections agency, which does decrease credit scores.
Those who have the most to lose from BNPL are the young people BNPL companies seek their customer base in. Their lack of credit history, low cumulative wealth, and often lesser financial literacy compared to older consumers make them susceptible to predatory companies. Per fortune, members of Gen-Z are being burdened with BNPL caused debt that they are unable to extricate themselves from. However, it is not fair to place the entirety of the blame on the consumer. Our culture encourages excess consumption and places far too much value on the importance of things. There is a competitive desire to keep up with the latest trends at the expense of sustained financial stability. In this environment, BNPL companies are just vultures feeding on the corpse of a financial system maimed by the wealthy for profit.
