'Buy Now, Pay Later' for Everyday Spending? This Financial Pro Thinks It's Risky
'Buy Now, Pay Later' apps can get you out of a jam when you need money quickly. But using them regularly for small purchases could create problems.


Whether you're buying gas, groceries or clothes, you now have the option to defer payments over several months through installments, rather than pay in full at the time of purchase.
These Buy Now, Pay Later (BNPL) services, from firms such as Klarna and Affirm, can be tempting when money is tight: Their promise of interest-free borrowing is compelling.
Traditional 0% interest loans have been common for decades. Thousands of people take advantage of them to fund expensive home repairs or renovations.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
By enabling large expenditures without having to spend down a savings account, they help buyers afford what they need, such as a roof replacement, and help the sellers make more sales.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
However, that 0% interest comes with a well-disclosed catch: Pay off the loan by the deadline or be charged interest from the beginning of the loan.
For those organized and responsible enough to meet the deadline, these loans can be a wise financial decision: Why not keep your money working for you as long as possible?
However, failure to repay loans on schedule has resulted in financial hardship for less organized people.
It's important to carefully consider your approach to credit before taking out any loan, but especially for loans with unfavorable terms, should you miss a deadline.
New 0% territory
The relatively new "0% loan" environment of BNPL, with shorter-term, lower-cost purchases, represents a seismic shift in the marketing and use of such loans. Often, payments must be made every week until the loan is discharged a month or two later.
As such, BNPL is frequently marketed to would-be borrowers for much smaller loans. It's now even possible to buy lunch on a six-installment weekly repayment plan.
What's worrying is that taking out small loans for lunch might not seem like debt. This is dangerous thinking. Anytime you borrow money that you are required to repay, regardless of whether or not interest is charged, it is debt.
Viewing it otherwise can lead you into trouble, as you may keep racking up "not debt" to the point where you can no longer afford the weekly payments.
That's when the risky side of BNPL rears its head: As with traditional 0% loans, missing a payment can result in painful financial penalties.
A missed payment can lead to late fees of about $30, according to Consumer Reports. If you financed a $5 sandwich, for example, that's the equivalent of 600% interest for just one late payment.
With many short-term BNPL loans, you have six opportunities to miss payments. That could turn into a very expensive sandwich.
Pros and cons of BNPL
Used responsibly, BNPL can be a good stand-in for a depleted, or never-started, emergency fund. Most financial advisers tell their clients to have a healthy emergency fund to cover unexpected expenses, such as car repairs or hospital bills.
But it can be difficult to set aside money for the "what-ifs" in life, and more than one unplanned expenditure can drain your savings quickly.
If you're in need of emergency purchasing power, BNPL can be useful as long as you know you can keep up with the required payments.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
The problem lies in using BNPL for ordinary purchases, such as lunch, gas or groceries. As with other transactions in which cash doesn't change hands, it's easy to lose track of how many purchases you've made and how much you've spent.
Without careful recordkeeping, it's all too easy to overspend, resulting in burdensome installment payments and an endangered credit score.
How to avoid financial trouble
To avoid this happening to you, make sure you understand the terms of any loan you take out:
- Beyond the interest rate, what penalties will you incur if you accidentally miss a payment?
- What other fees or costs are associated with the loans?
- Do you need the loan in the first place, or are you simply tempted to keep money in your own account as long as possible?
By asking yourself these questions before taking out a loan — BNPL or otherwise — you could save yourself significant unplanned expenses and damage to your credit score.
Related Content
- A Guide to Debt: Good vs. Bad and Tips to Better Manage It
- Can Buy Now, Pay Later Plans Help You Build Credit?
- The Hazards of Buy Now, Pay Later
- Klarna Buy Now, Pay Later Is Coming to a Walmart Checkout Screen Near You
- How to Take a Break Without Breaking the Bank
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jared Elson is a Series 65 Licensed Investment Adviser Representative (IAR) and the CEO of Authentikos Advisory. Following a 10-year career with Yahoo, Jared identified an acute need for sound financial counsel in the tech industry and has excelled in giving tech professionals the tools they need to grow and preserve their wealth.
-
Six Changes Coming to Social Security in 2026
Big changes are coming to Social Security in the year ahead, impacting everything from the size of your benefit check to your full retirement age. Here's what you need to know.
-
Don't Be a Sucker: The Truth About Guarantor and Cosigner Agreements
There are significant financial and relationship risks involved if you agree to be a cosigner or guarantor. Make sure you perform your due diligence, and know exactly what you're getting into, before agreeing to such a commitment.
-
Don't Be a Sucker: The Truth About Guarantor and Cosigner Agreements
There are significant financial and relationship risks involved if you agree to be a cosigner or guarantor. Make sure you perform your due diligence, and know exactly what you're getting into, before agreeing to such a commitment.
-
The Hidden Risk Lurking in Most Retirement Plans: Human Behavior
What's one of the differences between a good financial adviser and a great one? The ability to use behavioral coaching to guide clients away from emotional decision-making and toward retirement success.
-
Addressing Your Clients' Emotional Side: Communication Techniques for Financial Advisers
Rather than focusing only on financial plans, you can better serve your clients — and grow your business — by learning what to say and do when a client gets anxious or emotional.
-
Amazon Expands Free Fresh Grocery Delivery to 1,000 Cities
Amazon's expanded grocery delivery service costs less than Amazon Fresh. Is it a better deal?
-
Stocks Struggle Ahead of Busy Fed Week: Stock Market Today
The minutes from the July Fed meeting will be released Wednesday, while Chair Powell will deliver a key speech at Jackson Hole on Friday.
-
Is Crypto Investing Coming to a Credit Union Near You?
Credit unions are getting in on crypto investing through partnerships with third-party platforms, but the risks to investors still apply.
-
Seven Hidden Downsides of Dividend Investing, From a Financial Adviser
Dividend investing could be draining your wealth with unexpected costs and limited growth potential. Here are some downsides, along with smarter strategies to take control of your retirement income.
-
How to Position Your Business for a Lucrative Exit Despite Private Equity's Slowdown
As private equity firms seek strongly performing companies, crafting a narrative about your business' high-quality assets and future opportunities can make a lucrative sale possible.