Why Buy Now, Pay Later Debt Is a Growing Red Flag

Why ‘Buy Now, Pay Later’ Debt Is Becoming a National Red Flag

Over the last few years, Buy Now, Pay Later (BNPL) apps like Afterpay, Klarna, Affirm, Zip, and PayPal Pay in 4 became incredibly popular. What started as a simple way to split payments for clothes or electronics has quietly turned into something much more worrying.

According to a recent insight shared by Nigel Morris (co-founder of Capital One), millions of Americans are now using BNPL loans for essential items: groceries, medicine, diapers, and even gas. When people rely on short-term loans for basic needs, it usually means one thing:
financial stress is rising across the country.

And the most concerning part? A lot of this debt is invisible.

BNPL: The Fastest-Growing Form of Hidden Consumer Debt

BNPL adoption in the U.S. grew over 70% in 2023, and 2024 numbers are even higher. By the end of this year, Americans are expected to spend $80 to $100 billion through BNPL platforms.

But here’s the twist:
BNPL loans usually don’t show up on credit reports.

This is what Morris calls “phantom debt.”
It exists, but no one banks, lenders, credit bureaus can fully see it.

Why this is dangerous:

A person can take 5 to 10 BNPL loans at the same time across different apps.
Lenders cannot track how many loans are active.
Borrowers often underestimate how much they owe.
Many BNPL plans have late fees that snowball quickly.

A LendingTree study found that 34% of BNPL users missed at least one payment in 2023, and the number is rising.

Example: When Convenience Turns Into a Trap

Consider a young mother buying groceries:

$120 grocery shop → split into four payments
$60 on medicine → split
$85 on school shoes → split
$40 gas → split

Individually, each one looks harmless.

But together, that’s $305 owed across multiple apps, and payments hit every week.

When money is already tight, even a small missed installment can lead to late fees, account freezes, and more borrowing.

Americans Are Turning to BNPL for Basics A Major Red Flag

A recent survey by Credit Karma revealed:

56% of BNPL users have used it for groceries
36% used it for rent or utility bills
47% say BNPL helped them “survive the month”
22% now rely on BNPL every single month

This shows a shift from “shopping convenience” to “financial coping tool.”

Nigel Morris called this trend “a troubling sign for the overall health of the economy.”

Why Regulators Are Worried

The U.S. Consumer Financial Protection Bureau (CFPB) has already investigated BNPL companies after noticing:

Rising late fees
Aggressive marketing toward low-income groups
Lack of transparency in repayment schedules
No standard reporting to credit bureaus
Increasing delinquencies (especially among young adults)

And here’s the bigger problem:
BNPL usage is highest in households earning under $50,000/year, which means the most financially vulnerable Americans are taking on invisible short-term debt.

BNPL Companies Are Growing Fast — But So Are Defaults

BNPL companies grew rapidly during the pandemic, but now many of them are facing:

Higher default rates
Higher operational costs
Shrinking margins

See More: Podcasters Can Now Use Threads to Reach More Listeners

Affirm’s latest report showed loan delinquencies reaching 3.5%, up significantly from previous years. Klarna also admitted rising repayment issues.

If this trend continues, the BNPL bubble could create ripple effects across retail, credit markets, and even the broader U.S. economy.

Conclusion: A Storm We Should Not Ignore

BNPL isn’t evil. It can be useful, flexible, and consumer-friendly when used responsibly. But the moment Americans start using small loans to buy groceries, medicine, or diapers, it signals something deeper:
Living costs are high, incomes aren’t matching inflation, and people are struggling silently.

BNPL is giving short-term relief but building long-term financial pressure and because so much of it goes unreported, policymakers can’t measure the true risk.

If this hidden debt keeps rising, the country might face a financial problem that nobody fully saw coming.

America Growing Buy Now, Pay Later Debt Problem: A Serious Warning