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Each holiday season brings a predictable increase in consumer spending, but the way shoppers finance that spending changing rapidlyWhile credit cards once dominated online checkout Buy now, pay later (BNPL) arrangement is growing in popularity It is changing how families manage short-term expenses.
BNPL refers to a short-term payment plan that retailers offer to shoppers at the time of purchase. The most common model is “pay-in-four” – instead of paying the entire amount up front, the buyer pays 25 percent upfront and the remaining 75 percent in three equal installments. Typically debited automatically every two weeks,
This structure makes BNPL feel relatively frictionless and deceptively cheap for many buyers.
In 2024, BNPL’s share in e-commerce transactions was five percent, this proportion is expected to increase to 58 percent by 2030. In comparison, credit cards accounted for 20 percent of e-commerce transactions in 2024, and that share is projected to grow by only three percent by 2030.
Half of consumers are planning to Trust BNPL for your holiday shopping In 2025, understanding this change has never been more timely.
As families prepare for another holiday season of spending, BNPL will appear on many checkout pages with the promise of convenience and flexibility. But before clicking “Pay Later,” consumers should understand that these loans have real financial consequences.
Why is BNPL so attractive?
Two factors explain BNPL’s appeal. First, the time value of money states that an amount of money available in the present is more valuable than the same amount in the future. By reducing immediate out-of-pocket costs, this gives the impression of greater financial breathing room.
Many consumers also believe that BNPL is always interest free. While the pay-in-four model typically has no interest, monthly payment plans usually do, sometimes as high as 35.99 percent. The highest comparable annual percentage rate for a credit card is 26 percent.
Second, BNPL loan provider companies such as Klarna, Affirm and Afterpay typically only run “soft” credit checks, which do not affect the borrower’s credit score. This has led to a widespread perception that BNPL primarily serves individuals with limited credit access.
But in practice, usage extends across income levels. For example, in Canada, 40 percent of BNPL users report high household incomes.
However, such widespread use is not without risks.
Why is BNPL risky?
Despite its user-friendly design, BNPL changes the way people evaluate purchases. Its psychological effects can encourage excessive spending and contribute to long-term financial stress.
BNPL may lead buyers to prioritize immediate gratification over the pain of payment delays, what I call a “buy now, regret later” mentality.
About the author
Vivek Astavansh is Associate Professor of Quantitative Marketing and Analytics at McGill University.
This article is republished from Conversation Under Creative Commons license. read the original article,
Research has found that BNPL adoption increases buyers’ purchase frequency and purchase amount. This effect is stronger on buyers who are promotion-sensitive, young, and low-income.
More worryingly, BNPL users have to pay higher overdraft charges, credit card interest and late fees than non-users. Shoppers are especially prone to overspending during the holiday season. Although expenses increase during the holiday season, income does not, leading to increased debt.
5 things to keep in mind
Before choosing BNPL at checkout, buyers should take a moment to consider what they are agreeing to. The five points below can help consumers navigate these services more safely and avoid common pitfalls.
- BNPL appears under other names. Not all installment plans are described as BNPL, so be sure to read the terms carefully to avoid being misled by the marketing language.
- BNPL can take loan amount over the loan. When payments are taken out to a credit card, you are effectively borrowing twice and taking on double the risk. If automatic debit fails, late payment fees can be substantial. Don’t be misled when the checkout page says “You’ll never pay interest or late fees.”
- Governments are increasingly asking BNPL companies to undergo strict credit checks and report defaulters to other financial institutions and governments. As a result, the assurance that “your score will not be affected” may no longer be credible.
- Consumer protection remains uneven. It is unclear which government agency (if any) handles BNPL complaints. Until regulations are fully developed and consistently enforced, your financial security is your responsibility.
- BNPL expands the number of companies that handle your data. With credit cards, a financial institution manages the transaction. Under BNPL, consumers can shop from multiple retailers using different BNPL providers. It can be difficult to keep track of which provider handled which purchases, and disputing unrecognized credit card charges can be complicated.
3 questions to ask yourself before using BNPL
BNPL can be useful if used thoughtfully, but it is not appropriate for every buyer or every purchase. Asking yourself the following questions can help you determine if BNPL is in line with your financial habits and long-term goals.
Who is giving the loan? Review the BNPL provider’s FAQs and payment policies. Compare firms like Affirm, PayPal, Afterpay and Klarna. Vague and vague answers indicate low transparency, and you should avoid using such companies.
Do you buy products on impulse and lack financial self-control? If so, be careful of the risks of using BNPL, as it may increase that tendency.
Would strengthening your financial literacy improve your decision-making abilities? If so, consider subscribing to reliable financial education resources before relying too heavily on BNPL.
BNPL is a fintech innovation. When used responsibly, it can help buyers maintain liquidity. However, when used carelessly, it can make it easy for buyers to accumulate debt. As the holiday season approaches, an informed approach will help you appreciate its benefits and avoid the risks.