Can Using Buy-Now-Pay-Later Lead To A Cycle Of Debt?

Buy-now-pay-later (BNPL) services are everywhere, offering a quick and easy way to split purchases into smaller payments. Whether you’re shopping for electronics, home goods, or even groceries, the option to pay in installments can seem like a financial lifesaver, especially when money is tight.

As LeAnne Trom, Loan Administration Manager at First Alliance Credit Union, pointed out on the Good Money Moves podcast, “It’s a quick cash flow if you don’t have it today. A lot of times, it’s interest free.”

But with this convenience comes a risk: the temptation to make purchases without fully considering how those payments fit into your overall budget. As prices rise and incomes struggle to keep pace, more people are turning to BNPL to make normal everyday purchases. However, understanding the true cost, and potential consequences, of these services is crucial before you click 'checkout.'

How Buy-Now-Pay-Later Works and Why It’s So Popular

BNPL lets you break up a purchase into typically four equal payments, often over a month or so, with the first payment due at checkout. Major players like Affirm, Afterpay, Klarna, and even PayPal and Amazon offer BNPL at checkout. The process is seamless, just a click, and you’re approved, often without a hard credit check.

This ease-of-use is a big reason for its popularity. As LeAnne described,

“It’s built right into the checkout process, so it’s so easy to not even think about the impact that’s going to have on your budget moving forward.” - LeAnne Trom, First Alliance Credit Union

The perception of 'interest-free' payments can make BNPL feel safer than credit cards, but that sense of security can be misleading if you don’t keep careful track of payment schedules and spending.

Can BNPL Lead You Into a Debt Trap?

The answer is simple: Yes. What starts as a “no-interest” way to spread out a purchase can easily snowball into multiple overlapping payments, fees, and potential credit issues if you’re not careful. When those small installments stack up across several apps and purchases, it can quietly strain your budget and leave you relying on the next BNPL plan just to stay afloat.

The BNPL Debt Spiral: Recognizing the Warning Signs

It’s easy to lose track when you have multiple BNPL plans running at once, each with its own due dates, amounts, and apps to monitor. Those “small” payments can quickly overlap, making it harder to remember what’s coming out of your account and when. 

As LeAnne noted, “Pretty soon you financed your burrito, your tennis shoes, your new headphones and all of a sudden you’re having multiple little tiny payments. And sometimes not very tiny depending on the size of the purchase.”

Unlike credit cards, which consolidate your spending into one monthly statement, BNPL payments can be scattered and frequent, making it harder to see the bigger picture. 

If you start noticing these red flags, your BNPL usage may be creating a cycle of debt: 

• constantly juggling multiple BNPL payments
• feeling like your paycheck is spoken for before it even hits your account
• needing to open a new BNPL plan just to cover everyday expenses
• being frequently surprised by withdrawals you’d forgotten about
• getting hit with late fees on BNPL payments
• avoiding looking at your bank statements because you’re worried about what you’ll find

“If your payments are late, that’s where you really have to watch things,” LeAnne warned. Missing payments can trigger late fees, retroactive interest, and additional charges, quickly turning a manageable plan into a snowball of debt.

Watch & Learn: How Buy Now, Pay Later Creates a Debt Trap

Whether you’ve used BNPL before or are just starting to explore it, this video gives you clear, practical insights to help you protect your budget and make confident, informed financial decisions.

Smart Money Habits to Keep BNPL in Check

The key to avoiding a BNPL debt spiral is awareness and planning. A simple spreadsheet or budgeting tool can help you track all your installment plans and ensure you’re never caught off guard.

LeAnne recommends, “Look at your statements, take a deep dive, map everything out, put that on a sheet, write it down and say, ‘What are my paydays? What are my commitments?’” 

If you recognize you’ve overcommitted, prioritize your BNPL payments to avoid late fees and additional costs. Make sure you’re only using BNPL when it truly makes sense, such as for a one-time emergency purchase, when you know you’ll have the funds to cover the installments. And always read the fine print so you understand the terms, conditions, and potential fees involved.

Tools and Resources for Responsible BNPL Use

If you’re struggling to keep up with multiple BNPL payments, don’t be afraid to seek help. LeAnne shared, “If for some reason you aren’t able to keep up with payments and you are getting over your head, then I think it may be time to come in to the credit union and look at how we can help you.”

Alternatives like personal lines of credit, signature loans, or even credit cards may offer more manageable payment structures and lower interest rates, plus, they’re often easier to track and can help you build credit.

Ultimately, financial empowerment comes from understanding your spending habits and making intentional choices. “Budget is not a negative word,” LeAnne emphasized. “It’s just asking yourself, ‘Where is my cash flow? What’s coming in? Where is it going out?’”

For more guidance and access to safe, affordable lending options, connect with First Alliance Credit Union. Our team is here to help you regain control and build a financially healthy future.

Stuck in a Buy Now, Pay Later Debt Cycle? Get Help from Our Team!