As the holiday season approaches, “Buy Now, Pay Later” (BNPL) has become a popular checkout option. Once a novelty, these short-term financing plans are now ubiquitous. In 2025 alone, global BNPL transaction volume is projected to reach over $560 billion, a significant leap from previous years, with user numbers on track to surpass 900 million globally by 2027.
While convenient, the data reveals a growing disconnect between popularity and affordability.
The Hidden Cost of “Interest-Free”
Younger consumers continue to drive adoption, but they also bear the brunt of the financial risk. Recent data indicates that nearly half of Gen Z users have missed at least one payment in the last year, a rate significantly higher than older demographics. Across all users, late payment rates hover around 41%, challenging the narrative that these are risk-free alternatives to credit cards.
The issue isn’t just one loan; it’s the stack. Many users juggle multiple active plans simultaneously across different providers (Affirm, Klarna, Afterpay, and others), making it difficult to track total outflows. Because these small payments often fly under the radar of traditional budgeting, they can quickly accumulate into unmanageable monthly obligations.
A New Regulatory Reality
The Wild West era of BNPL is effectively over. Unlike in 2024, when regulations were still largely theoretical, 2025 has seen concrete shifts in oversight:
- Consumer Protections: Following the CFPB’s interpretive rule issued in mid-2024, BNPL lenders are now classified as credit card providers under the Truth in Lending Act. This means you are legally entitled to the same dispute protections, refund rights, and billing transparency as you would be with a standard Visa or Mastercard.
- Credit Reporting: The biggest change for 2025 is visibility. For years, BNPL loans were invisible to credit bureaus, meaning missed payments didn’t hurt your score, but on-time payments didn’t help it, either. That changed this fall. FICO has begun incorporating BNPL data into its scoring models, and major credit bureaus are increasingly ingesting this data. A missed payment can now legitimately damage your credit history.
Strategic Use
BNPL isn’t inherently bad; it’s a tool. It works best for a single, necessary purchase where cash flow is tight but guaranteed. It becomes dangerous when used to subsidize everyday consumption or when treated as “free money” during the holiday rush.
If you use it this season:
- Treat it like debt, because it is. The money leaves your account eventually.
- Monitor your credit report. With the new reporting standards, errors here can now impact your ability to get a mortgage or car loan.
- Stick to one platform. Centralizing your loans makes it harder to accidentally miss a due date.
Used thoughtfully, BNPL can be manageable. Used casually, especially during the high-spending holiday season, it can quickly lead to financial strain.
