The true cost of buy now pay later

A reader bought a $1,200 couch last year using Afterpay. “No interest,” the checkout said. She paid it off in four instalments.

She thought she’d paid $1,200 for the couch.

She actually paid closer to $1,440. Here’s how.

BNPL providers make money three ways, and the “0% interest” claim only covers the first: if she’d missed a payment, she’d have been charged $10 to $15 per late fee. She didn’t miss any. So far, so good.

But BNPL also charges merchants 4 to 6% per transaction. The merchant doesn’t eat that cost. They bake it into the price. A $1,200 couch is $1,200 only if you pay cash or debit. If half the store’s customers use BNPL, prices adjust upward across the board.

And the third way. BNPL encourages you to buy things you wouldn’t buy in cash. Research from the Consumer Financial Protection Bureau in 2023 showed BNPL users spend on average 20% more per transaction than cash users. She probably wouldn’t have bought the $1,200 couch. She’d have bought the $950 one.

Rule
If you can’t afford to pay in cash today, you can’t afford it in four instalments either. You’re just hiding the problem from yourself.

Action for this week
For the next purchase over $100, ask yourself: “Would I buy this if BNPL didn’t exist?” If the honest answer is no, walk away.

Next week
Rent vs buy in 2026. Five questions that decide it.

Know someone using BNPL for everything? Forward this.

P.S. The fastest-growing age group for BNPL use is 35 to 44 years old, not teenagers. This isn’t a kids problem. It’s an adult debt problem wearing friendly branding.