The Hidden Dangers of Buy-Now-Pay-Later Services
The Temptation of Instant Gratification
Micro-trends on social media can be irresistible, leading many to make impulsive online purchases. Buy-now-pay-later services, such as Klarna and Affirm, have made it easier than ever to keep up with the latest fashion trends. However, young people are increasingly finding themselves trapped in a vicious debt cycle.
A Debt Spiral Waiting to Happen
Jess Riley, a 31-year-old content creator, shared her debt journey on TikTok, revealing how buy-now-pay-later services almost led her to financial ruin. “I was definitely one of those people that was very susceptible to influencers,” she said. “When someone put out a new necklace, I instantly wanted that necklace … I would put it on Klarna just so I could have it.” This impulse buying was just that – impulsive. Sometimes Riley would forget what she ordered almost immediately.
The Lack of Regulation
Simon Trevethick, head of communications at StepChange, a UK debt charity, warns that the lack of regulation of buy-now-pay-later apps means people can accumulate multiple debts across various providers “often without proper affordability assessments.” This can lead to late fees and interest charges that place people in financial difficulty.
The Rise of Buy-Now-Pay-Later Loans
In the US, the number of buy-now-pay-later loans increased by 1,100% between 2019 and 2021, according to the Consumer Financial Protection Bureau. In the 2024 holiday season, Americans were expected to spend $18.5 billion using these services.
The Psychology of Spending
Traci Williams, a certified clinical psychologist and financial therapist, explains that buy-now-pay-later services make it easy to justify purchases by spreading payments over time. “Unfortunately, what you don’t consider is that not being able to afford it today likely means just that — you cannot afford it.”
Social Media’s Role in the Debt Spiral
Toni-Ann, a TikTok content creator, believes that social media, with its influencer-driven algorithms, plays a significant role in the debt spiral. “It pressures you to want to buy what everybody else has got or whatever you keep seeing advertised. Then Klarna is an option, so you’re just like, ‘oh, I just can spread the payments’.”
Breaking the Cycle
Beth Fuller, who shared her debt journey on TikTok, recommends cutting back on needless spending and focusing on saving up to pay for items outright. Traci Williams agrees, suggesting that people ask themselves if the purchase is something they want or need before making a decision.
A Fairer Alternative?
Klarna, Affirm, and Afterpay claim to offer fairer and more sustainable alternatives to traditional credit. They argue that they conduct strict eligibility checks, restrict the use of their services after missed payments, and cap late-payment fees. However, influencers and debt experts remain skeptical, citing the need for greater regulation and consumer awareness.
The Road to Recovery
For those trapped in the debt cycle, changing habits and mindset is key. Toni-Ann and Jess Riley, both of whom have struggled with debt, agree that it’s a marathon, not a sprint. By acknowledging the dangers of buy-now-pay-later services and taking control of their spending, they’re slowly but surely regaining their financial freedom.
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