What 'Buy Now, Pay Later' Really Costs You vs. Saving the Same Amount
Buy now, pay later (BNPL) is an alluring proposition to those trying to juggle income and debt, but it can backfire quickly and out of control.
If you've never used it, BNPL can supercharge your purchasing power with instant, interest-free financing spread over four installments. Usually based on soft credit pulls and alternative data, approval is simple and many providers don’t report your activity to the credit bureaus.
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The primary appeal is that short-term BNPL payments aren’t saddled with finance charges, but that easy access makes it easy to overspend and fall behind, especially when stacking multiple purchases.
Modern consumers spend so much on BNPL that if they diverted their Affirm, Afterpay, Klarna and PayPal purchases and fees to saving and investing, they’d be on the path to building wealth instead of buying stuff.
Little Loans, Little Late Fees, Big Spending
According to the most recent data from the Consumer Financial Protection Bureau, the average BNPL loan is for $135, with the average user taking out 6.3 loans per year for an average annual BNPL spending of $848. Additionally, the average late fee is $9.99.
LendingTree reports that as of June, nearly half of BNPL users (47%) have paid a late fee in the last year, an increase of six percentage points over 2025 and 13 percentage points up from 2024.
So, rounding to the nearest $10, a typical user with one late fee spends $860 on BNPL in a given year.
Micro-Debt or Microinvesting: Instant Gratification vs. Long-Term Wealth-Building
The LendingTree study found that 54% of BNPL users rely on the service just to make ends meet and cover basic necessities. Unsettling as that finding may be, the bright side is that nearly half use it to extend their purchasing power for wants, which gives them the opportunity to flip the BNLP concept to grow their money rather than spend it.
Nearly seven out of 10 users in the LendingTree study found that BNLP caused them to overspend and those who stack payments — juggling multiple staggered bi-weekly pay-in-four installments — get into trouble most often.
Acorns calls BNPL “microdebt” and suggests reversing the concept — and the associated opportunity cost — by redirecting that disposable income toward regular investment mini-contributions. Just like BNPL spending, you’ll barely notice the missing money at the time, but it will compound quickly — only this time in your favor.
What a Decade of BNPL Can Buy if You Save Now, Buy Later
If you saved the $860 average annual BNPL bill in a deposit account with a 3% yield instead of spending it, you’d have $11,014.70 after 10 years, including $1,554.70 in interest payments. Presuming a 2.5% annual increase to account for inflation, your decade of saving gives you $12,134.84, including $1,639.94 in interest.
If you took Acorns’ advice and invested it instead, presuming a 7% average annualized return, you’d have $14,405.65 after 10 years, including $4,945.65 in interest. The S&P 500 averages 10% annualized returns with reinvested dividends. At that rate, you would close out the decade with $17,307.42, including $7,847.42 in interest.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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