From Burritos to Boarding Passes: The Hidden Costs of Buy Now, Pay Later

From financing a burrito to booking an international flight, the use of Buy Now, Pay Later (BNPL) services have surged. According to a survey from Bankrate, about 30% of Americans, across all income levels, have used some form of BNPL to make a purchase.

While these services may seem convenient and harmless, especially for smaller purchases, are they as risk-free as they appear? Let’s take a closer look.

What you’ll learn:

• A False Sense of Affordability
• Doesn’t Build Credit, But Can Hurt It
• Smarter Alternatives

A False Sense of Affordability

A $180 concert ticket might feel like a splurge, but four payments of $45? That sounds manageable. A $90 pair of jeans? Paying $22.50 a month feels easier than dropping the full amount at once. And why not finance your daily lunch while you’re at it? A $10 burrito split into four payments of $2.50 seems like nothing.

But here’s the catch: the more you split up your purchases, the more recurring charges you accumulate. This can lead to impulse buying, picking up things you don’t really need or can’t truly afford, just because the payments feel smaller and more digestible.

Over time, these small payments add up. Managing multiple BNPL plans can complicate your finances and make it harder to track your budget.

Missed Payments, Late Fees, and Overdrafts

One of the biggest draws of BNPL is that many services are interest-free. When you see the option to split a purchase, it’s tempting to think, “Why not?”

But even without interest, these services often charge late fees, either a flat rate or a percentage, depending on the provider. According to the same Bankrate survey, 49% of users reported issues with BNPL services, with 16% saying they missed a payment.

You might think, “I’ve set up automatic payments, so I’m covered.” While that’s a smart move, the more BNPL plans you have, the easier it is to lose track. If you’re not closely monitoring your account balance, you could end up overdrafting, leading to fees from both your bank and the BNPL provider.

Even if your bank or credit union (like Alliant) offers overdraft protection, it won’t shield you from late fees charged by the BNPL service itself.

Doesn’t Build Credit, But Can Hurt It

BNPL might seem like a credit card or personal loan but without the possibility of accumulating interest. But unlike those options, paying off BNPL purchases on time typically doesn’t help your credit score, even though missing payments can hurt it.

So, while you’re not gaining any credit benefits, you’re still exposed to the risks of damaging your score if you fall behind.

Smarter Alternatives

Using BNPL occasionally isn’t likely to cause major issues. But relying on it to finance everyday purchases can slowly chip away at your financial stability. It can also lead to overspending by making unnecessary items feel more affordable.

If you’re drawn to the idea of interest-free payments for larger purchases, consider alternatives like credit cards with introductory rates as low as 0% APR for 12 months offers, such as the Alliant Visa Platinum Card (after the introductory period, a low standard variable rate applies ranging from 14.49%–26.49% APR. Balance transfer fee of 2% of the amount transferred, $5 minimum.)⁵¹ For even bigger expenses, a personal loan can help you spread out costs over a set period with more structure and transparency.