The “Buy Now, Pay Later” (BNPL) payment model has exploded in popularity, especially during times of economic uncertainty. In 2025 alone, the industry is set to grow by 12.2%, reaching $122.26 billion, according to Research And Markets. By 2030, the U.S. BNPL market is projected to grow even more, hitting $184.05 billion. This growth is driven by major players like Affirm, Afterpay, and Klarna, with Klarna set to go public this Friday, listing its shares on the New York Stock Exchange under the symbol “KLAR.”
As inflation continues to soar and interest rates remain high, many Americans have turned to BNPL solutions to ease the burden of their financial commitments. The resumption of student loan payments in October 2023 after a pandemic-related pause has further increased the appeal of flexible financing options. BNPL services allow consumers to pay for purchases in installments over weeks or months, often interest-free, which is a huge attraction in an increasingly tight economic environment.
BNPL Expands Beyond Retail
Initially, BNPL services were largely confined to the retail sector, but their use has expanded significantly into other industries, including travel, healthcare, and electronics. Consumers looking for flexibility are utilizing BNPL more than ever to make essential purchases and even travel bookings. The convenience of being able to pay for things like flights or medical expenses in installments is undeniable, and it’s becoming a mainstay for many households.
According to a March 2025 survey by Wallethub, 55% of Americans have used BNPL services, with 22% of them currently owing money to a BNPL provider. The same survey found that 19% of BNPL users had multiple loans at once in the past year, while another 19% had incurred late fees or interest charges after missing a payment. A separate Bankrate survey revealed similar concerns, with over half of adult users reporting issues such as overspending, missed payments, and buyer’s remorse.
Experts Warn of Hidden Risks
While BNPL services are marketed as a more accessible and “gentler” alternative to high-interest credit cards, experts are raising alarms about the risks that come with the convenience of installment payments. “Sometimes, it’s a viable way to access affordable credit and spread out the impact of a big purchase,” said Ted Rossman, Senior Industry Analyst at Bankrate. “Other times, it’s a ticket to overspending.”
Many BNPL users focus on the installment payments, neglecting the total cost of their purchases. This mindset can easily lead to spending more than intended, creating a cycle of debt that can be difficult to break. “We can trick ourselves into focusing on the installments rather than the total cost of ownership, and that can lead us to spend more than we should,” Rossman added.
Another issue that’s emerged is the increasing similarity between BNPL services and traditional credit cards. For instance, Affirm and Klarna have introduced debit cards that can be used to create installment loans, making it easier for consumers to spend beyond their means. Over time, some BNPL plans have shifted from interest-free, short-term payments to longer-term loans with interest rates comparable to those of credit cards.
The Growing Risk of Late Fees and Debt
Missed payments can also trigger late fees, and as Martha Callahan, a certified financial planner at FBB Capital Partners, pointed out, this can lead to serious financial consequences. If consumers continue missing payments, their accounts may be handed over to debt collectors, and their credit scores could take a hit. “It’s similar to using a credit card where you make the purchase now, but when it comes time to pay that debt, if you don’t have the cash on hand to make the payment, you’re just digging yourself into a deeper financial hole,” Callahan explained.
BNPL providers are not immune to this, and consumers who miss payments risk facing penalties that could make their financial situation worse. This “debt trap” effect has some experts concerned about the long-term sustainability of BNPL as a primary payment method, especially for consumers who are already struggling with debt from other sources.
A Double-Edged Sword
The rise of BNPL solutions is undoubtedly reshaping how consumers shop and pay for goods and services. They offer undeniable convenience, and in times of financial strain, they can provide much-needed flexibility. However, as usage grows, so do the risks. Consumers must exercise caution, being mindful of their ability to repay loans on time, as the consequences of falling behind can be severe.
As BNPL companies continue to expand their reach, both consumers and financial experts will be watching closely to see how the industry adapts to these growing concerns. It’s clear that while BNPL offers flexibility, it’s essential for consumers to fully understand the potential downsides before diving in.
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