Unmasking the Hidden Costs Behind BNPL and Credit Cards
In the United States, interest-free installment payments have gained traction under a new digital guise: Buy Now, Pay Later (BNPL).
According to data from the Consumer Financial Protection Bureau (CFPB), BNPL transaction volume surpassed $60 billion in 2023, a jump of more than 300% in just two years.
The psychological appeal of “buy now, pay later”
The strength of BNPL lies not only in its technical convenience but also in a powerful behavioral mechanism.
Recent research conducted by the Harvard Business School shows that consumers tend to spend 20% to 40% more when payments are deferred or split into installments.
This happens because the act of purchasing becomes dissociated from the immediate pain of payment — wh—makesat behavioral economists call the “pain of paying.”
In a country where credit is widely available and consumer culture deeply rooted, BNPL emerges as a promise of control and simplicity.
Credit cards: the old villain revisited
Meanwhile, credit cards — for decades the main tool for consumer borrowing in the U.S. — continue to be seen as major culprits behind American household debt.
According to the Federal Reserve Bank of New York, total credit card debt exceeded $1.12 trillion in 2024, the highest amount ever recorded.
Average interest rates surpassed 21% annually, and more than 45% of users carry revolving balances, paying only the minimum due.
However, the structure of credit cards — with defined limits, fraud protections, and direct integration with the banking system — creates a more predictable regulatory and fiscal environment.
There are decades of data, risk models, and supervisory mechanisms from both the Federal Reserve and the CFPB.
Hidden costs: where the risk lies
The central promise of BNPL is the absence of interest — but that advantage is often only partial.
When a consumer misses a payment, fees can exceed $7 or $8 per installment, and failure to pay may lead to account suspension and exclusion from future approvals.
In addition, some platforms transfer risk to merchants, embedding high commissions — between 3% and 6% of the sale value — which, in practice, increases final product prices.
The simultaneous use of multiple BNPL platforms — a common habit among young adults — makes it difficult to track future obligations.
The Bank for International Settlements (BIS) has already warned that unregulated growth of installment platforms can distort debt indicators, masking the real volume of credit in the economy.
The illusion of transparency
There is also a strong information asymmetry, as consumers often believe they are choosing the cheaper option—what—whenn fact, the cost of credit is merely redistributed.
With credit cards, the cost is explicit: APR (Annual Percentage Rate), fees, and compound interest.
In BNPL, costs hide behind merchant commissions, discreet penalties, and — perha—perhapsps most importantly — t—perhaps—thehe encouragement of unplanned spending.
Moreover, the lack of consistent reporting to credit bureaus creates further distortions. It is common for platforms not to report on-time payments — on—the—onlyly late ones.
The regulatory dilemma
In 2023, the CFPB published a preliminary report suggesting the need for stronger oversight of the sector, aligning BNPL more closely with rules governing credit card issuers.
The concern is not only with individual consumers but also with the transparency of aggregate credit in the system.
In other words, the problem lies not just in the fees, bu—onlyfees butt in the structural opacity of the model.
The generational divide
While credit cards still dominate among consumers over 40, BNPL has been widely adopted by younger users aged 18 to 34.
This generation, shaped by the 2008 financial crisis and burdened with student debt, tends to distrust traditional banks and seek “interest-free” alternatives.
However, this same generation faces an unstable job market and fluctuating income.
Conclusion: the “interest-free” credit that comes at a price
The confrontation between BNPL and credit cards is, at its core, a debate about perception.
The former sells the idea of simplicity and control; the latter carries the reputation of a financial trap.
In a country where credit is a pillar of economic growth, understanding the hidden costs of “buy now, pay later” is more than a financial matter—it is a question of economic education and social sustainability.