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Debit or credit? In this economy?
Cash-poor and maxed-out consumers are increasingly turning to trendy “buy now, pay later” microloan products to afford everyday necessities — as inflation and the cost of living rise faster than salaries and bank balances.
A report from Lending Tree found that 29% of users of popular BNPL brands like Klarna and Affirm use the services to purchase ever-pricier groceries and other essentials on credit — with 54% saying they wouldn’t be able to make ends meet without the loans. The usage numbers represent a 25% jump from last year — and over double just two years ago.
Additional research conducted by the Federal Reserve shows that one in five Americans used BNPL to pay for food from major chains like Walmart or food delivery on apps like DoorDash during the last year alone.
Groceries are now third on Lending Tree’s list of items most commonly purchased with BNPL, behind clothing and electronics — which are typically bought using a “pay in four” structure, where the creditor covers the cost of the purchase. The consumer then pays off the debt over a period of weeks or months, often interest free.
The trouble with that seemingly useful tool, experts say, is that when shoppers rely on this new way to pay too heavily, they can become quickly overwhelmed — an issue that’s becoming all too real for many, according to multiple reports of rising default rates.
Ashley Morgan, a debt and bankruptcy lawyer in Northern Virginia, worries about the way BNPL has become normalized — without being widely understood for what it is.
“Buy Now, Pay Later has become so common that many consumers don’t really think of it as debt anymore,” Morgan said. “A $200 purchase may feel expensive, but four payments of $50 somehow feels affordable.”
The problem arises when shoppers can’t stop using it, she explained — a move called loan stacking where consumers can’t resist the urge to keep using the now ubiquitous services.
One in four BNPL users have had three or more active BNPL loans at one time, and 68% said that the loans wind up enabling them to overspend, according to Lending Tree.
“Suddenly several hundred dollars from your next paycheck is already committed before you even get paid,” Morgan said. “If you need BNPL to regularly make ends meet, the problem … isn’t the payment plan; the underlying budget no longer works.”
There’s a reason why BNPL is increasingly being used on day-to-day needs, said Matt Schultz, chief consumer finance analyst at LendingTree — it’s easy.
“The problem is that because they tend to be easier to get than credit cards and other types of loans, it can be easy to overspend and get yourself in some trouble, especially if you’re relatively new to managing credit,” Schultz told The Post. “[These companies] have done an amazing job in making their loans available to be used for almost anything, almost anywhere at almost any time.”
Big debt, big business
The concept of “no interest” is what reels consumers in, experts say of the services, which include PayPal, Block, Afterpay and more. The brands are controlled by massive fintech corporations and Wall Street private credit backers — ostensibly under the oversight of federal financial watchdogs.
But the growing, multi-billion-dollar market comes with fewer protections and more terms than average bank loans or credit card contracts.
Some BNPL loans are interest free, yes — but read the fine print before you click, because many times the companies can tack on hidden fees, the pros warn.
A spokesperson for PayPal confirmed to The Post that consumers who choose the common “pay in four” option will not be charged any interest or late fees.
But this isn’t true for PayPal’s “Pay Monthly plan” — an interest-bearing installment loan. The payments giant allows users to break up the cost of some purchases up to $10,000, into fixed monthly payments, up to 24 months.
That loan is issued by a bank partner, and comes with a fixed annual percentage rate. PayPal charges APRs ranging from 9.99% to as high as 35.99% based on creditworthiness. So if you already have low credit scores and then get a loan at 35.99%, a large chunk of your monthly payments is going toward interest.
Klarna operates on a similar model — offering no-interest “pay in four” installments, but also a longer-term “pay over time” monthly financing option that winds up costing the consumer more as interest rates once again get as high as 35.99% APR.
Cody Schuiteboer, president and CEO of Best Interest Financial, told The Post that consumers should wade into the BNPL waters carefully — and never assume the loans are “no interest” unless explicitly told.
“The ‘no interest if paid on time’ pledge has been broken. Interest-bearing installment loans comprised over 37% of BNPL issuance in 2026. Schuiteboer said — saying that consumers are now paying an average of $7-8 in late fees per payment.
Schuiteboer cited data that shows 47% of BNPL users had problems with making their payments on time this year. He reiterated the danger of letting smaller BNPL charges pile up on top of one another — especially if stacked onto already high credit card balances.
