6 Dangers of ‘Buy Now, Pay Later’ Apps — And How to Avoid a Debt Trap
Buy now, pay later apps are an increasingly popular way to finance purchases.
Here’s how they work: Companies like Affirm, AfterPay and Klarna allow you split the cost of everyday purchases, from running shoes to groceries, into several installment payments.
Pay-in-four loans are a common model. You’re required to make a small down payment, usually around 25%, then enroll in autopay with a credit or debit card for the remaining three payments, often spread out two weeks apart.
And people are using them — 10% of our Financial Anxiety Barometer survey respondents have used BNPL for essentials like groceries. It may seem like an attractive alternative to credit cards, because pay-in-four plans don’t charge interest.
Pretty tempting, right? That’s the whole idea.
But buy now, pay later isn’t free money. It’s a short-term loan, and the business model is sounding alarms from regulators and consumer protection advocates.
“BNPL isn’t the life preserver it pretends to be to keep consumers from drowning,” said Ed Mierzwinski, senior director of the federal consumer program at U.S. PIRG, a consumer advocacy group. “It’s a come-on to spend more.”
Here are six pitfalls to keep in mind with buy now, pay later services, along with tips to avoid a debt trap.
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6 Dangers of Buy Now, Pay Later
It may be convenient to delay paying off a purchase up front, but be wary of these risks that come with using BNPL.
1. Buy Now, Pay Later Can Hurt Your Credit
Just applying for a buy now, pay later service won’t hurt your credit score because these companies don’t run a hard credit check on your history.
However, BNPL loans impact your credit in other ways.
In the past, most BNPL companies didn’t send all their data to the three major credit reporting bureaus — TransUnion, Equifax and Experian. That’s changing. Affirm announced in 2025 it was going to start reporting on-time, late and missed payments to Experian and TransUnion. Klarna also reports to TransUnion and Experian, but AfterPay has yet to jump on board.
Current credit reporting conventions also aren’t designed for short-term revolving lines of credit, like buy now, pay later loans. Credit reporting agencies are attempting to reconcile this with BNPL companies, but it’s a work in progress.
If BNPL companies reported all their data to credit reporting bureaus under the current system, it could actually hurt consumers’ credit scores, even if they made timely payments.
“That’s because each BNPL loan is a new line of credit, which can significantly reduce a person’s average length of credit history,” said Summer Red, an accredited financial counselor.
Plus, if you start missing payments, your debt could be turned over to a debt collection agency and could be sent to a credit reporting company, which can ultimately damage your credit scores.
2. You Could Overextend Yourself
Because not every buy now, pay later company reports information to the credit bureaus in a consistent fashion, traditional lenders might not be able to see how much debt you’re really carrying.
“This could result in someone being approved for additional credit that they can’t afford to pay,” Red told The Penny Hoarder.
If you apply for a car loan or a new credit card, for example, and the lender can’t see you have $1,000 in BNPL loans due next month, you could get saddled with a big car payment while still paying off BNPL loans.
And because BNPL companies only conduct soft credit inquiries, one BNPL lender has no idea how much you’re borrowing from other BNPL companies.
Most buy now, pay later providers won’t let you take out another loan until you catch up with late payments. But there’s nothing to stop you from splitting up another purchase with a different provider, a practice known as loan stacking. In fact, one in four of BNPL users say they’ve had three or more active loans at a time, according to LendingTree.
“It can be easy to miss a payment when you have a lot of individual bills,” Red said.
3. You Could Face Late Fees
Each buy now, pay later company has different terms and conditions on what happens if you fall behind on payments.
Some might not charge a late fee at all, like Affirm’s Pay in 4. Others do: Afterpay, for example, charges up to 25% of the original order, no more than $68, and Zip charges $7.
Falling behind on payments is common with Buy Now, Pay Later users. LendingTree found that 47% of users paid late on at least one of these loans in the last year.
4. You’re Also More Likely to Overdraft With Multiple BNPL Loans
If you link a debit card to autopay for a loan and don’t have the funds, you could run into overdraft fees, which can be costly.
All five of the major BNPL companies attempt to reauthorize failed payments, in some cases, multiple times.
That means you could get hit with multiple overdraft fees from your bank in a short time if the BNPL company keeps running a linked debit card with insufficient funds.
5. Buy Now, Pay Later Encourages You to Overspend
By design, BNPL services encourage you to buy more and borrow more. This makes it easy — dangerously easy — to overspend.
“It’s so easy to think ‘Oh, it’s just this small payment,’” said Kate Mielitz, an accredited financial counselor and the former special programs manager at AFCPE. “But those small payments add up to very large payments very quickly.”
The LendingTree survey also found that more than half of BNPL users see the loans as a way to stretch their money.
“BNPL makes it easy to make impulse purchases,” Red said. “That can quickly spiral into spending more than you can afford.”
6. BNPL Companies Push Products Directly to Consumers
Buy now, pay later companies have been tempting shoppers to split up their purchase at online checkout for years.
Now, these companies are targeting consumers in other ways, including pushing an app-driven model to directly engage with potential shoppers.
BNPL lenders often collect your data, too, which they use to deploy product features and marketing campaigns targeted specifically to your buying preferences.
So even when you’re trying to save money and stick to your budget, these companies are making it harder.
4 Tips to Help You Avoid a Buy Now, Pay Later Debt Spiral
Buy now, pay later services can help spread out the cost of big purchases over time, but they also make it easy to impulse buy items. If avoiding interest is what makes these short-term loans appealing to you, we suggest looking into 0% APR credit cards. These cards offer a promotional period when no interest is charged, so you can pay off balances or make purchases without worrying about interest fees.
If you must use buy now, pay later loans, remember these tips.
- Only take out one BNPL loan at a time. Juggling multiple loans from several lenders makes it easier to miss a payment, incur late fees and overdraft your bank account.
- Write down your due dates. BNPL companies don’t always notify you before they withdraw money from your account. Jotting down due dates or setting a reminder on your phone can help ensure you have sufficient funds before you get charged.
- Change your payment due date. Some BNPL companies like Klarna and Afterpay let you extend your due date. This can give you some breathing room to adjust your budget and come up with the money before you fall behind on payments.
- Decide if you really need it. Is this a need or a want? Chances are it’s the latter. If you don’t have the money to buy the item outright, kicking the can down the road won’t make it more affordable.
Rachel Christian is a Certified Educator in Personal Finance and former senior writer for The Penny Hoarder.
