Buy Now, Pay Later: An Analysis of Financing

 Author: Lucas Cheng

Editors: Goldman Tian and Anina Ma

You’ve probably heard the term everywhere; even Amazon has introduced a “buy now, pay later” system. Yet, out of all of the chaos, what is a buy now pay later system (referred to as BNPL for the sake of this article from now)? BNPL systems are a type of financing that allows a high cost to be split up into multiple micro-costs over time. The schedule can be different depending on the company or the plan you choose. Usually, companies have two different plans: bi-weekly or monthly payments.

What are the benefits of BNPL systems? Well, they are simply more manageable, especially if you do not have surpluses of money. In today's competitive job market, it is a lot harder to earn money. In fact, in the U.S., we’ve been experiencing a downtrend in the Labour Participation Rate, declining to 62.4% in December 2025.

Figure 1. Labor Force Participation Rate trendline from December 2005 to 2025.

Fewer and fewer Americans can find jobs in the U.S. as time goes on, so it may be easy to assume BNPL systems are beneficial, right? Well, this system is a lot more malicious than it initially seems.

1) BNPL Systems include interest rates!

Usually, if you pick the monthly version, these companies will put interest rates on your monthly payments. What this means is that you’ll ultimately pay a lot more for the same product if you were to just pay in full.

You may ask: “Well, why not just use the bi-weekly plans then?” Well, mainly because there’s even more hidden fees behind just interest. Even though most BNPL systems try to advertise their plans as “interest-free,” there is always a caveat. Many of these plans have late fees for missed payments, service fees depending on your provider, and may even charge EXTRA for using certain cards. Therefore, if you ever decide to use a BNPL system, you should always read the terms and conditions before confirming.

Yet, don’t just buy my word on it; let the statistics of today convince you. In September 2025, 49% of people who used BNPL systems reported missing at least one payment. Although minuscule, these missing payments are no joke and can have major consequences. Missed BNPL payments affect millions of people. In fact, 45% face legal disputes and need a lawyer to help, which is very costly.

But it’s not just the economic impacts, but the psychological ones as well. A study ongoing from 2018-2025 had concluded that there was a strong association with impulsive purchases from BNPL and regret afterwards. A separate study in 2025 had concluded BNPL had caused 4.39% more spending and a 22.2% higher likelihood of discretionary purchases.

  What can we conclude from this? Well, in theory, BNPL doesn’t have any outstanding downsides, assuming you’re able to overcome your intuition and impulses. However, the fact is that most people simply cannot handle their impulses, and BNPL simply makes buying and purchasing things way too intriguing. If we simply look at the statistics, it becomes clear that you are better off away from BNPL systems; however, if used properly, they provide short-term benefits.

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References

Dean, Mary Elizabeth. “How Does Buy Now, Pay Later Work?” Sacramento Bee, 2026, https://www.sacbee.com/careers-education/how-does-buy-now-pay-later-work/. Accessed 18 March 2026.

Jose, Anu, et al. “Behavioural mechanisms of buy now, pay later products.” Central Bank, 2026, https://www.centralbank.ie/docs/default-source/publications/research-technical-papers/rtp-15-2025-behavioural-mechanisms-of-bnpl.pdf?sfvrsn=9b816e1a_8. Accessed 18 March 2026.

LegalShield. “New Legalshield Research warns of 'buy now pay later' credit crunch: 3 in 4 Americans use it, half miss payments.” The Hidden Dangers of Buy Now Pay Later Financing, 2025, https://www.legalshield.com/press-releases/new-legalshield-research-warns-of-buy-now-pay-later-credit-crunch-3-in-4-americans-use-it-half-miss-payments?utm_.com. Accessed 18 March 2026.

Melhorn, Stephanie Ferguson. “America Works Data Center: The U.S. workforce by the numbers.” U.S. Chamber of Commerce, 2026, https://www.uschamber.com/workforce/america-works-data-center. Accessed 18 March 2026.

Nusir, Omar M., et al. “The psychology of BNPL: A systematic review of impulsive buying and Post-Purchase Regret (2018-2025).” Home Page, 2025, https://doi.org/10.20944/preprints202512.1201.v1. Accessed 18 March 2026.