The truth about buy now, pay later-is it hurting your finances?

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Introduction

Online checkout screen showing Buy Now, Pay Later payment option

“Buy Now, Pay Later” (BNPL) services like Afterpay, Klarna, and Affirm have exploded in popularity across the U.S.—especially among younger shoppers. But in 2025, as delinquencies rise and regulators take notice, many are asking: Is BNPL actually hurting your finances?

BNPL’s Rapid Growth and Rising Risks

A 2025 report by the Consumer Financial Protection Bureau (CFPB) found that over 42% of BNPL users have missed at least one payment. With the convenience of splitting payments into four or more installments, it’s easy to overspend and underestimate your total debt.

Who Is Most at Risk?

According to a CNBC report, Gen Z and millennials are the most active users of BNPL—and also the most likely to carry other high-interest debts. When combined with credit card balances, this can lead to a dangerous debt spiral.

Benefits When Used Responsibly

BNPL can be useful for managing cash flow or breaking up large purchases—especially when there are zero interest fees. However, many users don’t fully understand the repayment terms. That’s why in our recent post on low-barrier investing, we emphasized paying off short-term debt before investing.

Smart Ways to Use BNPL (If at All)

  • Use only for essential, planned purchases—not impulse buys.
  • Track each installment in your budget. Apps like YNAB or Mint can help.
  • Avoid stacking multiple BNPL plans across different retailers.

Regulatory Outlook in 2025

Federal agencies are now considering new rules for BNPL transparency. California and New York have already introduced legislation requiring clearer disclosures on fees and payment schedules. These changes aim to protect consumers from hidden risks.

Final Thoughts

Concerned shopper reviewing BNPL payment notifications on smartphone

BNPL isn’t inherently bad—it’s the way you use it that matters. In 2025’s complex financial landscape, being intentional about every purchase is key. Use BNPL only when it aligns with your budget and long-term goals, not as a workaround for limited funds.

Looking to better manage your irregular income? Read our guide on freelancer budgeting strategies.

Published by financewisedaily

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