How “Buy Now, Pay Later” Seduced a Generation—and Trapped It in Debt | The Walrus

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How “Buy Now, Pay Later” Seduced a Generation—and Trapped It in Debt

From burritos to Beyoncé tickets, micro-loans now bankroll our most routine needs

by Vass Bednar Updated 8:13, Aug. 27, 2025 | Published 6:30, Aug. 27, 2025

Editor’s note: About Canada via Walrus, but sam applies to United States.

For decades, stores like Leon’s, K Mart, and Zellers offered layaway: a no-interest, pay-in-pieces system where you picked out an item, the store held it, and you chipped away at the cost over weeks or months. Families used it to stretch toward something special—a couch, a TV, Christmas gifts. Eventually, in the 1980s, credit cards took over, and stores grew tired of holding merchandise. But until then, purchases were a pact, a structured ritual of financial restraint. The store trusted that you’d follow through; you trusted that the item would be waiting.

The contours of that pact have since shifted. “Buy now, pay later”—BNPL—programs are a kind of digital layaway but with a twist: you get the reward before fulfilling the commitment. Fintech firms like Afterpay, Flexiti, Sezzle, and Tabit let consumers break down big buys into smaller, more manageable bites. That means you can purchase an item and still defer payment, but now you claim your prize at the point of sale instead of waiting. You can have your cake, eat it, and pay for it eventually.

And people are eating a whole lot of cake. The BNPL payment market in Canada is expected to grow by 12 percent annually to reach $7.5 billion (US) in 2025. The calories haven’t been showing up on our debt waistlines either. In Canada, total consumer debt reached a record high of $2.5 trillion in the fourth quarter of 2024—but BNPL is sometimes referred to as “phantom debt.”

BNPL is essentially a microloan with no credit check. Instead of you buying something, the provider buys it on your behalf. They give most of the money to the merchant but keep a small slice for themselves (compensation for the risk they’re assuming). From the merchant’s perspective, the deal is done, the money is in their pocket, and maybe it’s a sale they wouldn’t have made otherwise. They move on. The providers are left to collect.

Collection involves BNPL firms debiting the money from your account. The consequences are similar to those of other consumer debt: late fees, overdraft charges from your bank, penalty interest, or the potential for your loan to be sold to a third-party collector. Some firms can also lock you out of future loans. Long-term instalment plans may come with the higher interest rates. These arrangements are generally less predatory than payday loans, which inflict exorbitantly high rates. And they aren’t as exploitative as lease-to-own arrangements, in which consumers can end up shelling out two to three times the item’s original price.

Still, BNPL lives in a regulatory grey zone: it is neither a credit card nor a traditional loan. It’s proven popular for a mobile-first generation with a lack of credit history and a desire for instant gratification, because it creates the illusion of low-stakes borrowing. But that convenience can mask real financial fragility. BNPL debt can accumulate invisibly, leaving consumers in the dark until it snowballs. The result is a system that masks risk while amplifying it.

Continue/Read Original Article Here: https://thewalrus.ca/how-buy-now-pay-later-seduced-a-generation-and-trapped-it-in-debt/