An Absurdly Apparent Danger: Buy Now Pay Later

Ryan Heshmati

February 23, 2024 (Last Modified June 4, 2024)

A favorite local Japanese ramen spot accepts orders and payments via a QR-code-enabled portal. Through this online portal, one of the many payment options is a go-to for many: Apple Pay. Unsurprising. However, once the final checkout screen on Apple Pay pops up, a surprise does arrive: a toggle between the default “pay in full” and another option, “pay later.” The buy now, pay later trend has reached a point where a meal can be split into four bi-weekly payments. “Apple Pay Later,” enabled for purchases from $75 up to $1,000, is just one facet of the growing space.

While Apple is not unique, as plenty of companies (the likes of Klarna and Afterpay) are solely focused on buy now, pay later (BNPL), its integration of BNPL with Apple Pay makes their choice particularly notable. On Apple’s website, the option is described as “made for smart spending — not overspending.” The entire premise of buy now pay later, however, is contradictory to that statement. Such financing only adds value if it enables purchases that could otherwise not be made, yet if the purchase could not be made before, it likely should not be made even if its payments can be split up. 

Nevertheless, buy now, pay later is quite popular with young consumers. A Motley Fool Ascent survey determined that 42% of 18-24-year-olds and half of 25-34-year-olds have utilized the method of payment plan. It is tempting to question whether there is anything really problematic with those figures. The same survey also found that “ 26% of Americans who have used buy now, pay later have missed or made a late payment.” That is where the holes begin to materialize.

The United States has a spending problem. The government’s deficit spending has burnt a $30+ trillion hole in the country’s national debt. The credit card, American consumers’ traditional means of spending beyond their means, has led the average American household to rack up thousands of dollars in debt. And now, BNPL threatens to fasten yet another arm to the tree of American irresponsible spending.

Debt is, of course, not inherently bad. There are responsible ways to use debt, but financing a bowl of ramen should not be on the table. The easy access to credit has fostered a dangerous environment that engenders excessive borrowing. BNPL certainly did not represent Apple’s promised “smart” spending to the 26% of adults who missed or made a late payment on their BNPL plans. As long as corporations can encourage continued consumption, they are unlikely to make any changes to protect consumers; thus, even though dangling 0% interest and accessibility to otherwise unaffordable products can be enticing, consumers have a responsibility to reject these plans.