The Buy Now, Pay Later Trap – Gen Z’s Hidden Debt Crisis

Imagine a 25-year-old at an airport departure gate, traveling to the Dominican Republic for a vacation that she paid for with four $1,000 payments over the course of six months using Afterpay. She will tell you that it made budgeting easier. She will claim that she didn’t earn enough money to use a credit card. To be honest, it’s difficult to ignore the reasoning. When the amount on the screen at checkout is only 25% of what you would otherwise owe, the math appears doable. That’s precisely why it’s so hard to argue with and so subtly risky.

Services like “buy now, pay later” have advanced quickly. According to data from the Consumer Financial Protection Bureau, BNPL loan volumes increased by almost 1,100% just between 2019 and 2021. Lockdowns, e-commerce booms, retailers frantically trying to maintain sales, and interest rates so low that postponing payments felt almost entirely harmless were all accelerated during the pandemic years. During that time, businesses like Klarna, Affirm, and Afterpay achieved multibillion-dollar valuations by positioning their products as transparent, adaptable substitutes for credit cards, which Gen Z had already come to distrust. The timing was ideal. The question of whether the result is still open.

In 2024, about 30 million Gen Zers in the US—roughly 44% of the generation—used BNPL services. For the first time, this figure has made BNPL the preferred payment method among young consumers, surpassing credit cards. The situation is similarly startling in Indonesia, where 62% of active PayLater users are between the ages of 18 and 30, and the bulk of transactions are for non-essential items like fashion, electronics, and food delivery. Not groceries. not lease. Takeout orders and sneakers, paid for over time. It would be easy to characterize that as careless, and some commentators do just that, but it leaves out an important detail. These individuals operate in economies where prices and wages have not changed, have no credit histories, and have no savings buffers. A gap left by previous financial products was filled by BNPL.

Observing this, it seems as though the industry designed the product to appear innocuous at the exact time when it is most likely to be abused. $50 doesn’t look like $200 at the register. Although the entire cost is technically visible—it is listed right there—spending decisions are known to be impacted by the psychological framing of a smaller immediate number.

According to scholarly research that was published in the International Journal of Finance and Business Management in 2025, BNPL has caused Gen Z users’ consumption patterns to change from need-based to desire-based, resulting in short-term credit dependence that can lead to personal financial crises, especially in early productive age. That’s a clinical way of saying that young people are getting into problems before they’ve had a chance to establish any kind of financial foundation.

The figures pertaining to defaults and hidden costs show more serious issues. Approximately 56% of BNPL users acknowledge that they overspent or failed to make payments on time. The estimated $700 billion unaccounted BNPL debt pool worldwide conflicts with the industry’s reputation as a conscientious, customer-friendly substitute for credit. The situation has gotten worse in India, where young professionals making between ₹30,000 and ₹40,000 a month are said to be accruing debts of ₹30 to 50 lakh, frequently as a result of recurring small digital loans that seem manageable on their own but become crippling when taken as a whole. More attention should be paid to the trend of a generation allegedly increasing consumption while falling behind on repayments, particularly for loans under ₹50,000.

It is worthwhile to carefully consider the comparison with credit cards. BNPL avoids credit checks and the high interest rates associated with credit cards. For those who are ineligible for conventional credit products, this accessibility is truly helpful. However, credit cards also carry regulatory oversight that BNPL services have traditionally avoided, leave a paper trail, and appear on credit reports. Even though they are not perfect, there are systems in place to identify instances of credit card overspending.

For the majority of its history, BNPL debt has existed in a sort of regulatory shadow, allowing users to stack several services at once without any lender being able to see the whole picture. This could be altered by stricter regulations, which some governments are pursuing. It’s also possible that, while maintaining the model, the industry modifies its procedures just enough to avoid significant oversight.

The cultural current that underlies all of this is difficult to ignore. Gen Z has inherited an economy shaped by housing markets they cannot afford to enter, financial crises they did not cause, and a cost of living that consistently exceeds their income. Doom spending, or impulsive purchases made as a coping mechanism for financial anxiety, is real and well-documented. BNPL, which provides the feeling of access without the immediate pain of cost, fits neatly into that pattern. Depending on who you ask, the companies creating these platforms and the researchers examining their impacts often have quite different opinions about whether that’s a product feature or a design flaw. In any case, the installments continue to be due.