Imagine a 23-year-old recent college graduate working a gig job, managing multiple subscription services, and with only $50 left in her checking account. She might seem unlikely to splurge on a $550 ticket to Coachella, California’s annual pop-spectacle music festival. But the calculus might change if she’s offered a buy-now-pay-later plan to split the cost of the ticket into a series of deferred installments. Multiply this situation by hundreds of thousands and you have an idea of what happened last month, when over 60 percent of the nearly 200,000 Coachella attendees reportedly used a payment installment plan to afford the luxury of the experience—up from just 18 percent in 2009, when the festival first made these plans an option.
Buy-now-pay-later plans are short-term loans that allow consumers to split purchases up into installments over a set period. Once reserved for high-cost items such as refrigerators or engagement rings, these services are now increasingly being used to finance small purchases such as burritos or lipstick. According to a recent report, the number of US consumers using buy-now-pay-later plans rose from 49.2 million in 2021, to 86.5 million in 2024—a 76 percent increase in just four years. As these plans become more popular among less financially secure consumers, their risks increase.
For many young buyers, buy-now-pay-later plans have already become the first choice for financing even non-essential purchases. Brandon, a 27-year-old graduate student working in North Carolina, told me that he used them to make “clothing purchases on a limb” for things he didn’t need because of the convenience, adding, “what’s another $20 a month?” The appeal of deferring payments was echoed by Shayna, a 25-year-old physical therapist in Manhattan, who used a buy-now-pay-later plan to buy her boyfriend a gift she couldn’t afford. “It was something I needed to get now, but didn’t have all of the money for at the time,” she said. For consumers like these, payment installment services offer a feeling of financial freedom and instant gratification.
Younger people are especially likely to utilize these schemes. In a 2025 study of users of buy-now-pay-later plans, researchers found that millennials overwhelmingly use them the most. Almost half have used these plans compared to just 21 percent of consumers from other generations. With financial literacy also declining among millennials, this trend points to the normalization of debt among young adults.
Part of the appeal of buy-now-pay-later plans is how they stack up against traditional credit products. Paul, a 26-year-old Long-Island native working in Manhattan, recalled that “in college, I didn’t have a financial understanding about credit cards, I thought they would hurt my credit, so I didn’t have one. These plans were just easier to use and didn’t require you to know much about credit.” After using Affirm to buy a drone he couldn’t purchase outright, Paul recalled, “the item was now mine, even though I hadn’t fully paid it off.” Affirm even advertises itself as “an alternative to credit cards.”
Popular payment plan providers like Klarna and Afterpay gamify the user experience through rewards, notifications, and reminders, further incentivizing the use of these plans. These services promote a culture in which debt is not an exception but a lifestyle, and where financial carelessness is masked by the optics of affluence. For those already living paycheck to paycheck, these lending schemes are not just dangerous, they’re predatory.
Buy-now-pay-later plans remain widely unregulated. Many don’t require hard credit checks or income verification. Some perform soft credit checks, which do not appear on credit reports and examine limited credit information rather than performing a full financial evaluation—allowing individuals with poor financial standing to access these options freely with a few clicks on a screen. Recent research published by the Consumer Financial Protection Bureau found that over 60 percent of buy-now-pay-later borrowers held multiple active loans and nearly two-thirds of buy-now-pay-later loans went to borrowers “with subprime or deep subprime credit scores.”
This sort of easy credit isn’t just allowing people to make necessary purchases when their bank balance is low; it is encouraging them to live beyond their means and worsen their financial standing in the long term. Users I spoke to reported making purchases they otherwise wouldn’t have, had it not been for the buy-now-pay-later option. With a lack of common-sense safeguards in place, buy-now-pay-later services target the financially vulnerable under the guise of convenience.
The situation becomes even more precarious in periods of economic uncertainty. According to a report released by the Federal Reserve Bank of New York, household debt in America has reached an all-time high of $18.04 trillion as of Quarter Four of 2024—well surpassing the previous peak of $12.68 trillion in Quarter Three of 2008. As consumers’ ability to meet financial obligations shrinks, buy-now-pay-later plans, with their lack of consumer safeguards, become a ticking time bomb. Because these agreements are not regulated with the same rigor as traditional loans or credit cards, people often underestimate the risk, leading to missed payments, late fees, and damaged credit.
Many of these plans hide their predatory practices through late fees, high interest rates for loans requiring monthly financing, and lack of transparency. Klarna, for example, promotes zero interest if users pay in installments of four. However, when they sign up for smaller monthly payments on the platform, interest rates can range up to 35.99 percent. The company puts this information in small lettering, while advertising in larger letters that you can “spread the cost over six to 24 months with interest rates starting at zero percent.” Afterpay similarly advertises “interest-free” installments yet charges late fees up to 25 percent of the order value. Meanwhile, being late on a payment for Affirm results in no late fees, but negatively affects a user’s credit score.
“These platforms tend to target consumers with lower credit scores.”
One startling statistic indicates that these platforms tend to target consumers with lower credit scores. According to a study done by the Federal Reserve Bank of Boston, an individual’s credit score was the single most powerful predictor of whether an individual had used a buy-now-pay-later plan. The study found that “Consumers with FICO scores lower than 700 have a significantly greater probability of using buy now, pay later compared with consumers with higher credit scores.” Regardless of whether these consumers are being purposefully targeted, individuals with weak credit scores are the most likely to use the plans—risking further damage to their credit and overall finances.
We’ve seen similar patterns play out before. Installment-based credit systems used in the 1920s allowed middle-class families to finance high-priced purchases like appliances and furniture. When the stock market crashed, defaults skyrocketed, and unpaid credit obligations became one of the many contributors to the Great Depression. The lesson is that unchecked access to credit without appropriate regulation endangers not only individual consumers but the broader economy.
Ultimately, credit availability should not come at the expense of consumer stability. The popularity of buy-now-pay-later plans reflects real economic strain and aspirational consumption, but these products are a gateway to deeper financial vulnerability. Installment-based payments will always be attractive to consumers struggling to make ends meet. The challenge lies in ensuring that short-term convenience doesn’t come at a disproportionate long-term cost to them.