The Buy Now, Pay Later Black Hole

Consumers borrow billions in “pay in four” installments

Andy Spears
3 min readMay 14, 2024
Photo by Pawel Czerwinski on Unsplash

While some suggest the economy is doing just fine, there are some warning signs out there.

Among them is the rapid rise and consistent growth of Buy Now, Pay Later (BNPL). These short-term installment loans allow a customer to make a purchase and pay for it in four installments (Klarna, Affirm, etc.).

The loans are available in-store and at online checkouts. They typically require a customer to pay 25% upfront and then the remaining in 3 equal payments spread two weeks apart. So over six weeks, a customer has paid in full.

The selling company gets the full sale price at time of sale, and the BNPL lender handles the rest. Customers usually pay no interest or fees IF they make all scheduled payments on time and in full.

The BNPL lenders earn money two ways: First, through a fee paid by the retailer to facilitate the transaction. Second, through late fees and interest on missed payments.

It can seem like a great way to manage cash flow.

It can also lead to a lot of problems.

Eleanor Pringle reports in Forbes that BNPL transactions represent “phantom debt.” A $700 billion black hole that masks the challenges of diminished…



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .