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Planet Money

Buy now, pay dearly? (update)

with Emilia Schmarzo, Terry Bradford, Julian Alcacar

Published November 12, 2025
View Show Notes

About This Episode

Planet Money explores how buy now, pay later (BNPL) services work, why they have spread so quickly, and what risks they pose to consumers and the broader financial system. Through the story of college student Emilia Schmarzo and interviews with Federal Reserve researchers, the episode explains BNPL's business model, its appeal to merchants and younger shoppers, and the dangers of debt "stacking" when usage is not reported to credit bureaus. An update looks at how BNPL has expanded to everyday necessities, who is using it most, and how it may soon affect credit scores.

Topics Covered

Financial technology Credit card debt Online retail Consumerism Inflation Student loans Buy now pay later Banking competition Debt payoff Regulation and safety in sports

Disclaimer: We provide independent summaries of podcasts and are not affiliated with or endorsed in any way by any podcast or creator. All podcast names and content are the property of their respective owners. The views and opinions expressed within the podcasts belong solely to the original hosts and guests and do not reflect the views or positions of Summapod.

Quick Takeaways

  • Buy now, pay later (BNPL) lets consumers split purchases into usually four interest-free installments after a soft credit check, which can make expensive items feel deceptively affordable.
  • BNPL companies typically earn money by charging merchants higher fees than credit cards in exchange for bringing in new customers and increasing average order sizes.
  • Because BNPL use is often not reported to credit bureaus, lenders cannot see how many concurrent BNPL loans a consumer has, making it easy for people to become overextended.
  • Banks and credit card companies have lost significant revenue to BNPL and are responding by restricting some BNPL transactions and launching competing installment products.
  • Research shows BNPL usage is highest among younger consumers and Black and Hispanic households, and many users already carry other forms of debt.
  • Nearly half of BNPL borrowers paid late in the past year, and there are plans to begin including BNPL behavior in credit scores, which could further depress Gen Z credit profiles.
  • Used carefully for necessary purchases and paid on time, BNPL can be a cheaper alternative to high-interest products like payday loans.
  • For impulsive shopping or untracked multiple plans across different platforms, BNPL can feel like "Monopoly money" and quickly turn into hundreds or thousands of dollars in debt.

Podcast Notes

Introduction and setup of Emilia's story

Emilia's early pandemic situation and mindset

Emilia describes being in lockdown in spring 2020 as a junior in college in San Diego, feeling bored and anxious[0:39]
• She says she hit a "midlife crisis" at age 20 and wanted new passions and hobbies to keep busy
She starts doing at-home exercise videos from social media influencers[1:02]
• Influencers show their workout routines and equipment, including various weights they claim will "make your butt grow"
Emilia gets drawn into the influencer ecosystem[1:25]
• She follows influencers and then other influencers who follow them, leading her deeper into that online world
• Host jokes she "fell under the influence" of influencers
Influencers' lives appear glamorous and aspirational[1:30]
• Emilia thinks if she gets the right clothes and accessories, her life might feel more like theirs
• She wants to be described as pretty and confident like the influencers she watches

Discovery of the $200 bikini and first encounter with BNPL

Influencers constantly post clothing "haul" videos with links to buy exactly what they wear[1:57]
• One video leads Emilia to a white and brown tie-dye bikini that feels like the first step to reinventing herself
Sticker shock at the bikini price and then seeing the BNPL option[2:19]
• The bikini costs around $200, which is much more than she has ever spent on a single piece of clothing
• She notices small text offering "four interest-free payments of $41.99 with Afterpay" just below the total
Installment framing makes the purchase feel cheap and clever[2:56]
• Emilia says $41.99 felt very affordable and she believes she will easily have $41 next month
• She admits that if she had multiplied $41.99 by four in her head, she might not have bought it
• She feels like a "genius" for paying $41 now for a $200 bikini, framing it as if she got a steal

How BNPL works mechanically in Emilia's first purchase

After a quick, non-impactful credit check, she is approved and completes the purchase[3:18]
• The credit check is described as "extremely cursory" and as one that won't affect her credit score
• Afterpay charges her card for the first installment, and they allow payment by credit or debit; she chooses credit
• The process feels very simple to her, with the bikini soon on its way

Escalation from one BNPL purchase to a shopping spiral

Second BNPL purchase and sense of limitless affordability

Soon after, Emilia sees another influencer showing off sneakers and clicks the link[3:35]
• She again sees a buy now, pay later option, which makes the price look like "$8" in her mind
Installments make her feel like she can "afford the world"[3:56]
• Feeling empowered by low installment amounts, she adds the swimsuit, a jacket, and jeans to her cart
• Her cart total at checkout looks like about $20 in terms of the first installments due, encouraging more spending

Rapid growth of her BNPL-fueled shopping over days

Emilia says the buildup of purchases happened over days rather than weeks or months[4:11]
She starts buying many clothing and shoe items using BNPL[4:33]
• She mentions buying nice jeans from Aritzia, fancy sweatpants and sweatshirts ("sweatsets"), and multiple pairs of shoes
• Shoes include high heels, Jordans, and Yeezys
Shopping becomes a primary source of excitement during lockdown[4:16]
• She describes buying stuff online as the only thing giving her an adrenaline rush while stuck at home
• Receiving packages in the mail felt like Christmas because nothing else was going on

Illusion of "free money" and disconnection from real costs

Emilia says the packages felt like gifts from a mysterious stranger footing the bill[4:57]
• She describes it as feeling like a company was paying out of "the goodness of their corporate heart"
She perceives BNPL as "free" or unreal money[5:07]
• She says it felt free because she didn't see physical cash leaving and it didn't feel like it would catch up to her
• She likens it to Monopoly money, emphasizing the unreality of the spending in her mind

First sign of trouble: the credit card statement shock

The first warning sign is an email from Discover saying her statement is ready[5:32]
• Before BNPL, Emilia avoided using her credit card except for essentials and emergencies and kept balances low
Her balance suddenly hits her credit limit[5:50]
• She sees a $2,000 balance, which is her credit limit, and her debit card balance has dropped from $700 to around $20
• Her physical reaction is intense; she says she felt like she was going to throw up and wondered how it happened

Framing the broader BNPL story and revisiting it in 2025

Hosts introduce themselves and set up the economic question

Hosts identify themselves as Alexi Horowitz-Ghazi and Taylor Washington[6:12]
They define a loan at its most basic as getting money now in return for paying back a little or a lot extra later[6:14]
• They note that loans have existed since at least ancient Babylon
They observe there has been an explosion of companies offering what appears to be "free money" via no-interest loans[6:32]

Overview of the episode and update context

They outline the episode's questions: what BNPL is, how it works, why it is everywhere, and whether to be worried[6:44]
They explain the story of Emilia was first reported in 2022[6:46]
• Since then, BNPL has continued to spread, and people are using it for basic necessities as living costs rise
• They mention that this is happening at the same time that credit scores are falling, especially among Gen Z
They plan to revisit how BNPL firms make money and provide an update on Emilia in 2025[7:11]
• They say they will examine who is using BNPL now and whether it is a good deal for individuals and the economy

Deeper dive: How buy now, pay later works and who uses it

Why producers became interested in BNPL

Producer Taylor explains she noticed many people her age (Gen Z) using BNPL and sharing shopping sprees on TikTok[8:45]
• She saw a lot of people jumping in "headfirst" just like Emilia
In an editorial meeting, the team realized they had seen BNPL checkout options online but did not understand them well[9:02]
• Some compared BNPL to payday loans, rent-to-own schemes, or layaway plans
Layaway comparison: similar installments but product is only received after full payment[9:14]

Introducing Federal Reserve researchers as BNPL "investigators"

Payments expert Terry Bradford of the Kansas City Fed is introduced[9:25]
• She says she and colleague Julian started examining BNPL a couple of years ago
Her colleague Julian Alcacar also works at the Federal Reserve Bank of Kansas City[9:31]
Hosts jokingly ask them to describe their dynamic; Julian compares them to Woodward and Bernstein[9:46]

BNPL as credit by another name

Terry says BNPL is essentially credit by another name[10:04]
• She compares it to buying a car or a house in that it is a loan-based purchase, but without interest for BNPL
The "too good to be true" aspect: interest-free loans[10:51]
• BNPL companies offer to spot customers the purchase amount after a soft credit check and allow repayment in four installments
• Repayments are collected from a bank account, debit card, or credit card, with no interest on those installments
This raises the question: how do BNPL firms make money if users don't pay interest?[10:43]

Investigating the BNPL business model and revenue sources

Terry and Julian initially expect fees and interest to be the main profit source, as with traditional lending[11:04]
• They find that fees for customers are generally not very high, and there is no interest for most standard BNPL products
For customers who do not over-borrow, BNPL loans can be extremely cheap[10:51]
• They characterize BNPL as "basically the cheapest money you can get" if you stay within your means
Julian expected a "gotcha" moment similar to a horror movie jump scare but did not find it where he thought he would[11:47]

Merchants as the main revenue source for BNPL firms

Instead of relying mainly on customer fees and interest, BNPL companies take a cut from the merchants selling the goods[11:50]
• Terry reports that merchants pay BNPL firms between about 4% and as high as 9.5% per transaction
Comparison to credit card merchant fees[12:12]
• Credit card companies usually charge merchants between 2% and 4%
• This means BNPL providers are often asking for roughly double typical credit card fees
Why merchants accept higher BNPL fees[12:12]
• Credit card charges vary by network and rewards, making costs harder to predict for merchants
• Credit cards also include consumer protections such as chargebacks when customers dispute purchases
Chargebacks are a burden on merchants that BNPL can reduce[12:12]
• If products break or don't perform, credit card users can request chargebacks, and merchants may have the full amount withdrawn
• This is a pain point for businesses that BNPL arrangements can mitigate since the risk allocation differs

BNPL's value proposition to merchants: new customers and bigger baskets

BNPL brings in customers who might not otherwise buy on credit[12:49]
• Target groups include people without much credit history, those with bad credit, and those reluctant to use credit cards, such as many who grew up after the financial crisis
• Emilia is cited as someone who was initially allergic to credit cards but used BNPL
Young BNPL users represent potentially valuable long-term customers for merchants[14:08]
• As these younger customers age, they may earn more income and become repeat buyers
BNPL reduces online cart abandonment by breaking up large prices[14:18]
• Julian explains that many online shoppers abandon carts when they see a $200 total and decide not to spend it
• BNPL makes large purchases seem smaller by focusing attention on the first installment amount, leading people to complete purchases
• The hosts connect this to Emilia's sense of "Monopoly money" and low apparent cost per payment

Rapid expansion of BNPL across sectors

Pandemic-era acceleration and proliferation of BNPL providers

BNPL has been growing in the U.S. since at least 2015 but reached a tipping point during the pandemic[14:52]
• As online retail exploded due to lockdowns, the number of BNPL services also surged
Terry lists several BNPL companies: Afterpay, Affirm, Klarna, Zizzle, and Zip[15:07]
• She notes they began forming partnerships with large merchants like Amazon and Target
BNPL shifted from niche youth-focused offerings to a mainstream payment option[15:30]
• Initially, BNPL mainly partnered with trendy brands and targeted younger people wary of credit cards
• Over time, it became a general payment form used for many types of purchases

BNPL reaches diverse use cases, including healthcare

Terry says there is a BNPL firm for almost any need: small and medium business, business financing, auto repair, home remodeling, and healthcare[15:51]
• She emphasizes the breadth of offerings, including "for easy payments" for home projects
Taylor shares her own experience seeing BNPL for medical procedures[15:44]
• She describes needing her wisdom teeth removed and finding that her dentist offered to use BNPL for the procedure
• She calls that level of integration "a little much" and jokes about the deep-throat connection back to her wisdom teeth
Terry summarizes that BNPL is increasingly present in many corners of the economy and can look good for customers and businesses[16:32]

Banks' and credit card companies' response to BNPL competition

Credit cards as the preexisting dominant everyday credit tool

The hosts note that since the 1960s, credit cards have been the main way people pay with credit for everyday expenses[19:16]
BNPL's growth is described as threatening to "stodgy old" banks and credit card companies[19:01]

Revenue loss and strategic reactions from financial institutions

One report showed that banks lost between $8 and $10 billion in revenue to BNPL offerings[19:05]
• As BNPL became more popular, many consumers used it instead of credit cards, reducing transaction fee and interest income for banks
Banks are not passively accepting this competition; they are trying to respond[19:31]
• The hosts say financial institutions don't generally "just sit back and let things happen to them"
Specific bank and card company reactions[19:46]
• One example: Capital One refuses to let their credit cards be used for most BNPL purchases
• Many banks and credit card companies are acquiring BNPL providers or launching BNPL-like installment products themselves
Resulting ecosystem: BNPL options even layered on traditional credit purchases[20:49]
• The hosts describe a scenario where someone can buy a plane ticket, pay for wisdom teeth removal, and purchase Yeezys, and pay for all of it later using such products
• They note that much of this spending currently does not get reported to credit bureaus

Risks of overextension and lack of BNPL visibility

Stacking multiple BNPL loans without oversight

Each time Emilia chose BNPL, she was taking out a small loan, but lenders could not see her other BNPL obligations[20:19]
• BNPL firms have limited visibility into consumers' total BNPL commitments across different platforms
Terry and Julian see this lack of visibility as the main area of concern[20:35]
• They highlight the risk that consumers may take on more concurrent BNPL plans than they can afford
Traditional lenders check for outstanding debts; BNPL generally did not[20:58]
• Terry contrasts BNPL with credit cards and personal loans, which check if borrowers have good or no credit and whether they have existing loans
• She says BNPL firms had no idea how many BNPL products a given consumer was simultaneously using
The ease of "stacking" BNPL plans[21:27]
• Because there was no centralized reporting, it was fairly easy for consumers to stack multiple BNPL plans at once

Historical parallel with early credit card adoption

The hosts compare BNPL's early unregulated growth to credit cards in the 1960s[21:12]
• Credit cards also represented a new, widely available form of credit that many people did not fully understand, leading to overspending and financial trouble
BNPL's novelty and lack of oversight may similarly contribute to consumers getting in over their heads[21:27]

Amelia's first crash: confronting debt and talking to her dad

Emotional reaction to realizing the extent of her debt

Amelia describes being in a state of panic: pacing, sweating, and crying after seeing her balances[21:39]
• She decides the situation is serious enough that she has to call her father

Her father's response and advice

She had maxed out her credit card and nearly emptied her checking account in about a month[21:45]
• When she calls, her father is explicitly mad, not just disappointed
He warns her about the dangers of installment payments[22:06]
• He calls installment payments extremely dangerous and says they affect her future
• He points out she is not paying $10 but $40, emphasizing the total commitment rather than the small installment
Her father refuses to bail her out financially[23:14]
• He insists she must pay off the accumulated spending herself
Agreement to stop using BNPL and lessons he tries to instill[23:24]
• They agree she should stop using BNPL, pay off what she owes, and not continue with it
• He tells her if she wants something expensive she must pay from savings up front or wait for her next paycheck
• He tells her she should not be able to afford all the items at 19 or 20, and her debt proves she clearly cannot

Relapse into BNPL use shortly after

When asked how long before she used BNPL again, Amelia admits it was about two weeks[24:11]
• She bluntly says, "I didn't learn," indicating the pull of BNPL and shopping habits

Amelia's extended BNPL use and eventual decision to quit

Continued heavy BNPL use after 2022

Amelia says that for a while after 2022, she kept using BNPL a lot[24:19]
• She started receiving numerous texts saying amounts like $22.99 were being pulled from various debit sources
Small payments added up across platforms[24:39]
• Multiple charges of $22.99 and similar amounts accumulated to about $900
• She was using Klarna, Afterpay, and probably Affirm all at once
She describes the experience as feeling like being "buried alive" by the charges[25:27]

The breaking point and decision to go cold turkey

After about a year and a half more of BNPL buying, she notices she gets more texts from BNPL companies than from friends[24:48]
• She interprets this as the "later" in buy now, pay later finally arriving
Two years before the 2025 update, she decides to stop using BNPL entirely[25:52]
• She characterizes this as going cold turkey and says she has not used BNPL since
She reports that she has paid off all of her BNPL debts[25:33]
Even after quitting, temptation remains at checkout[26:05]
• She still sees BNPL buttons every time she shops online, and they appear in more places all the time

BNPL offerings for cosmetic procedures and her refusal

She recalls getting her lips done and being asked if she wanted to use a lender called Cherry to pay[26:47]
• Cherry is described as a lender that finances lip fillers and plastic surgeries for up to $50,000
Amelia declines to use Cherry[26:33]
• She calls Cherry the scariest thing to her and says if she had not learned her lesson, her lips would be on an installment plan

2025 update: who uses BNPL now and emerging credit implications

BNPL's ubiquity and shift from luxuries to necessities

Terry says there is now almost no place where you cannot see BNPL offers[26:11]
• She notes that a big change is that BNPL providers that were trying to be everywhere a few years ago now truly are widespread
People increasingly use BNPL for essentials, not just "nice-to-haves"[27:16]
• She contrasts earlier use for extras with current use for gasoline and groceries

Demographic patterns in BNPL usage

Federal Reserve research finds racial differences in BNPL use[27:27]
• The Fed's research found that Black and Hispanic households are more likely to use BNPL than any other demographic group
BNPL users often already carry other kinds of debt[26:59]
• The Consumer Financial Protection Bureau found that BNPL users tend to have balances on student loans, car loans, and personal loans
Late payment rates and planned credit score integration[28:04]
• Nearly half of BNPL borrowers paid late last year
• There are plans to factor BNPL into credit scores starting sometime this fall
Potential heavy impact on Gen Z credit scores[28:27]
• The hosts note this may land heavily on Gen Z because they are the most likely to use BNPL and their credit scores have been falling over the past year

Need for education and risks of spiraling debt

Terry emphasizes that younger demographics are heavily using BNPL[28:39]
• She worries that without education about how BNPL can spiral, it could become a lingering problem
She states that BNPL could become a problem, and a long-term one, if not used carefully[27:55]

When BNPL can be a good deal versus a bad idea

Terry says BNPL can still be a good deal for prudent shoppers[28:47]
• One example: someone who needs to buy groceries but lacks access to other credit or cash
• Because there is no interest, BNPL is generally better than payday loans in such situations
She cautions that BNPL is not advisable for shopping sprees[29:31]
• She distinguishes between using BNPL for necessities versus indulging in impulse buying like Amelia's spree

Amelia's current relationship with credit and influencer work

Changes in her payment habits after quitting BNPL

After dropping BNPL, Amelia also stopped using credit cards[29:43]
• She appears to have moved away from revolving credit entirely

Continuing engagement with influencer culture from the other side

Amelia did not give up the influencer-oriented lifestyle[29:55]
• She now works for a company that helps influencers partner with brands
She also does some influencing herself[30:07]
• An example clip shows her preparing for a pool party and giving followers a mini haul of bikinis to choose from
• She says this influencing helps scratch her old "bikini-buying itch" without taking on debt

Credits and host update

Production credits

The episode was originally produced by Emma Peasley, engineered by Josh Newell, and edited by Molly Messick[31:34]
The update segment was reported by Vito Emanuel, produced by Willa Rubin, and edited by executive producer Alex Goldmark[31:46]

Update on former producer and co-host of the original episode

They give special thanks to Taylor Washington, noting she is no longer a producer at Planet Money[31:58]
• Taylor is now in nursing school, about to graduate
Host Alexi signs off, and they replay Taylor's original sign-off line from three years earlier[32:22]

Lessons Learned

Actionable insights and wisdom you can apply to your business, career, and personal life.

1

Small, interest-free installment payments can psychologically disguise the true cost of purchases, making it easy to accumulate large debts without noticing.

Reflection Questions:

  • • What recurring small payments am I currently making that I haven't recently totaled up to see their real monthly and yearly cost?
  • • How might my spending decisions change if I always calculated and considered the full purchase price instead of the installment amount?
  • • What specific system (spreadsheet, app, reminder) could I set up this week to track all installment or subscription payments in one place?
2

When lenders and credit bureaus lack a full view of your obligations, the responsibility for preventing overextension shifts almost entirely onto you.

Reflection Questions:

  • • Where in my financial life am I assuming someone else (a bank, app, or provider) is monitoring my risk when in fact they aren't?
  • • How could I create a simple snapshot of all my debts and obligations so I can see my true exposure at a glance?
  • • What regular check-in (monthly, quarterly) can I schedule to review whether my total payment commitments are still safe relative to my income?
3

Tools that genuinely help in emergencies or for essentials can be harmful when used for impulsive wants, so the context and purpose of using credit matter as much as the product itself.

Reflection Questions:

  • • When I use any form of credit, how often is it for genuine needs versus impulse-driven wants?
  • • How would my finances look different if I had a personal rule for when I will and won't use installment payments or credit?
  • • What concrete criteria could I define (e.g., type of purchase, size, timing) to decide in advance when I will allow myself to "pay later"?
4

Education and clear mental models about how new financial products work are critical for younger consumers who are often the primary targets of those products.

Reflection Questions:

  • • What newer financial tools or apps do I use regularly that I haven't taken the time to fully understand?
  • • How might seeking out a neutral explainer or talking with a financially savvy friend change the way I use those tools?
  • • Who in my life (siblings, friends, colleagues) could benefit if I shared a clearer explanation of one financial product I've already learned about?
5

When you realize a particular behavior or tool repeatedly leads you into trouble, sometimes the most effective strategy is to remove it entirely rather than rely on willpower alone.

Reflection Questions:

  • • What financial habit or tool in my life has a track record of getting me into stress or trouble, even when I intend to be careful?
  • • How could I redesign my environment-rather than my self-control-so that it's harder or impossible to fall back into that pattern?
  • • What is one concrete step I could take this week (closing an account, deleting an app, adding a waiting period) to create friction around that risky behavior?

Episode Summary - Notes by Kai

Buy now, pay dearly? (update)
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