When to use buy now, pay later services
May 12, 2023
Season 1 | Episode 4

When to use buy now, pay later services

Hint: Don’t spend money you don’t have!

Buy now, pay later programs might seem like a magic wand, instantly shrinking the size of your initial payment for a purchase. But BNPL services like Afterpay or Klarna come with risks too. This week, “Financially Inclined” host Yanely Espinal talks with tech editor Joshua Bote of SFGate to get the full story on BNPL, so you can click “place order” with confidence. Dive in with us by watching the video below.

Think you’re financially inclined? Learn more about BNPL.

This podcast is presented in partnership with Greenlight: the money app for teens — with investing. For a limited time, our listeners can earn $10 when they sign up today for a Greenlight account at http://ww.greenlight.com/inclined.

Financially Inclined S1 Ep4: Buy Now, Pay Later Transcript

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.


(MUSIC: Fun, upbeat music plays)


Yanely: What’s up everybody. I’m Yanely Espinal. Welcome to Financially Inclined from Marketplace. We’re sharing money lessons for living life your own way.


(Title card saying “Financially Inclined” appears)


Yanely: In this episode we’re jumping into “buy now pay later” services like Affirm, Afterpay or Klarna. You might have seen some of these when you’re shopping online or scrolling through Tiktok.


(A series of TikTok videos promoting or talking about the various services Yanely mentioned).


Yanely: Here’s how it works. Let’s say you’re on the Shein website or the Adidas website, and you find something that’s exactly what you want to buy. But when you look at the cart total, it adds up to way more than you thought. So now you go to checkout, and you see some icons. You might see icons for Affirm or Afterpay as an option. Now, if you use them, they will break up your payment into four equal chunks. And then you agree to send a payment every two weeks. So let’s say the outfit you want to buy is $100. Instead of paying that all upfront, you pay $25 upfront, and then you pay $25 every two weeks until that full $100 balance is paid off. Now this can be a solid option if you don’t have all the money for an item upfront, but you know that you’ll have the rest of it in a few weeks. But often these services encourage us to spend money that we don’t have at all and that leads people to taking on more debt that they otherwise would not have taken on. Now to learn more details about this, I sat dwon and spoke with Joshua Bote. He’s an assistant editor at SFGate newspaper in San Francisco. He is 25 years old and he really cares about these issues that affect his generation, Gen Z. And that’s why he chose to investigate buy now, pay later services.



Yanely: I feel like a lot of the teenagers that I’ve worked with in schools and young people that I’ve spoken to, what I hear a lot of them say is actually this sounds like it’s really helpful. This sounds like it could come in handy. You know, especially because a lot of teenagers might be working a part time job, but they might not have all that money in cash upfront to buy it. And since a lot of times teenagers might not be 18 yet, maybe they’re 15, 16 or 17 still, they might not have a credit card. You can kind of see that, yeah, it’s being positioned in this really great, helpful way. But there’s actually some problems that come from it as well. So for somebody who maybe sees the advantages, but they don’t really understand what, why is this such a bad thing, what would you say to them if they asked, you know, so what’s the problem? This sounds great to me.


Joshua: It does sound really great. And a lot of influencers I spoke to who are critical of buy now, pay later got a lot of angry messages that were like, “these services seem great, these services seem really helpful. I don’t know what’s going on.” But the tricky thing is that because these services encourage you to spend more, not only are you, you know, run the risk of getting getting fined by your bank, you end up just spending more because you think that you’re not paying that much money in general. I, one of the statistics that was so wild to me was that the average shopping cart for a regular purchase is around $100. Right? But one of the companies that I spoke to Affirm, their data found that the average cart size using Affirm is $365, nearly four times right how much you would spend normally if you didn’t use these services. So you run into the risk of overspending, you run into this issue where you’re buying so much more stuff that you don’t actually need because you feel like you can afford it now.


Yanely: Yeah. I think that’s definitely a good point because what you look at on the screen is like a small number compared to what you expected to pay. And there’s kind of a little bit of like psychology going on, like it’s messing with your mind a little bit because it’s playing a trick on you. You think that you’re getting kind of like a discount, but it’s not a discount. I feel like one of the things that they have really done with buy now, pay later marketing and advertising all over, you know, social media and online, is that they have really made themselves totally different and separated from credit cards. And so I know like some people they see buy now pay later and they probably think this is a safer option. This is something that you know, is better than taking credit card debt with those high end interest rates and doing those negative debt cycles that a lot of the older millennials have. So for a younger Gen Z shopper that might be like, you know, a safer, it might seem like a safer, or better or smarter financial choice. What would you say to that? Like how would you respond to them thinking that these are different, and this is much better than credit card debt?


Joshua: I use TikTok a lot, as a lot of people did especially during quarantine. And what I started noticing was that a lot of people would use these services and joke about these services in a way that almost felt a little bit absurd. They would be like, “I’m gonna buy a mansion next to Kylie Jenner. And it’d be like, a billion dollars, but I can, you know, I can push it out using Afterpay, or Klarna or Affirm like a million payments.” And it got me thinking, why are these services so popular? And why are they so pervasive, especially among Gen Z? You feel like these things are better because they advertise on the face: no late fees, no interest. And those are the things that scare young people the most about having a credit card, right? Here’s the thing. With credit cards, because they’ve been around for so long, there are laws now that require credit card companies to behave in a certain way, treat their customers in a certain way. And that sort of requirements makes it harder for credit card companies to take advantage of you. Coudn’t you compare that to buy now pay later services, which don’t have those things, set of laws that they have to abide by. In actuality, because you’re spending more money, because they’re taking up money from your checking account, and you could run into overdraft fees, there are risks that you get into when using these services, even if it seems a little less risky, on its face. And you’re right, the marketing of this is exceptionally, it’s really, really good. And part of that is because of influencers you see on Instagram, you see them TikTok, you see them holding up like a cool new purse, or cool new pair of sneakers. And so often you get confused. You don’t know whether it’s real like or if these companies paid that person to show off their cool new thing that they got basically for free. And that’s the tricky difference is that you know what the risks are of credit cards, we all know, we know they’re scary. But we don’t know what the risks are a buy now pay later services yet because the laws haven’t required them to fully show what they’re up to. What kind of debt people are in. And it’s tricky.


Yanely: Yeah. That’s a good point that the, there’s two parts of it. It’s like the laws don’t really cover what they can and cannot do the same way as credit cards. They kind of you know, credit cards have to follow certain rules, they have to do things a certain way. Versus buy now pay later is just so new that it doesn’t have as many rules and laws to follow. But at the same time, it doesn’t have as much reporting requirements. So you know, they don’t really have to talk about what the numbers are behind closed doors. They can keep those things a little more secretive. So I think it’s interesting for you to point out these things about the laws, because I feel like that would get a lot of young people’s attention. A lot of people that don’t realize like, they’re kind of skirting around the laws right now, like kind of tiptoeing around it and getting away with something that really maybe some people will say is not right, is maybe not ethical. And it’s just so new that they’re getting away with it right now. Do you feel like you feel like it’s fair to say that?


Joshua: Skirting the law is a really great description. So one of the laws in question is called The Truth in Lending Act. And the Truth in Lending Act, basically, is what credit card companies have to follow to make sure that they’re not taking advantage of customers. And one of the key things of this law is that they can regulate services with five or more payments. And this is such a tricky thing, right? These paying for services don’t have to follow this law, because their services are split up into four payments. So that they can sort of go around this law, right. And that’s such a perfect example of how they can be able to go around these laws and not quite have to follow them in the same way.


Yanely: I wonder about people that, you know, maybe they are wondering if is there a time where using buy now pay later services is actually okay, like, it’s going to be helpful, and I paid all my payments and, and it was and it was something that actually made my life a little easier. And if they feel like that, I’m not, I’m not interested, and I don’t think anybody’s really interested in making anyone feel bad about using these services or feel shame or anything like that. But so if you’re a young person, and you’re looking at this and you’re thinking maybe I want to do it or not, but I don’t know. Like, how do you decide, is this a good thing or a bad thing for you and your financial situation?


Joshua: My goal with my article wasn’t to shame people for using it or to, you know, outright say never use the services because there is a time in the place. And, you know, if you need it for necessities, if you need it for groceries or gas, or something that you just absolutely need in order to exist as a human in this world, by all means go for it. The other thing that I would suggest is, if you’re going to have to use the services, have the money on hand at least like… I’m not a financial expert, by any means. But I would think like at least have half of what this big purchase will be right? So if you’re gonna make like a $600 purchase, have a few $100 on hand in order to make sure that you’re not running into those withdrawal, into fees with your bank for not having enough money in your balance. Try to use these services responsibly and not that often too. And as troubling as these services are, for some respects, they’re… they can be used, like any other financial tool in a way that can help you and help you pay for things that you need. And yeah, I think that it’s important to note that these services are just like any other ones. They’re like credit cards. They have their own risks, but they also have their own rewards.


Yanely: I have another question that I’m curious here. You talked so much about this, and you researched so much about this. After all the reporting are you ever gonna use by now pay your services again? Why or why not? Put you on the spot.


Joshua: Again, that’s yeah… I feel a lot of pressure I. So I’m going to be frank Yanely. I am. Because now that I know all the risks of getting into it, I feel like an informed consumer. And that’s sort of the goal of these stories. And that’s the goal of your show. And that’s the goal of anyone who’s trying to be more responsible with their finances is to be an informed consumer. And being and having all that information really helps you use these products more smartly. I feel like I know when exactly I can use buy now pay later, in a way that is responsible for me. And I know that next time I use it, I’m not going to do it because I want the fancy sweater and I’m not going to, and I can’t afford it right now. But I’m going to use it for something that I really need. And something that’s really expensive. And something that is going to be worth it for many, many years down the line.


Yanely: Yeah, that’s, that’s keeping it real right there. And also, I think you said that, you know, you have some rules, some basic rules that you follow too. Like, do I have 50% of this total price now? Do I have you know… and maybe that’s not everybody’s rule, but it’s a rule that you have, that will work for you. So I love that you said like, I’m going to put my rules in place and as long as I follow that, it’s going to work for me because I’m aware, I’m aware. And I think awareness is so important. You know, the fact that we’re being nudged, and we’re not really aware of how much exactly do we owe. You know, what, what is this totalling? I don’t really know. The awareness is such a key. So I love that. Thank you for sharing that.



Yanely: You heard Joshua. It’s not like he’s just gonna give up using these services forever. There’s definitely a time and a place to use stuff like this. And now that you know about the pros and the cons of these services, it’s worth taking some time tonight, or maybe later this week to really think about what you’re choosing to buy and if you have enough money right now to even buy these things. If you know you’re gonna have the money, then go for it. But if you’re really not sure, then you might be getting yourself into some money trouble. And most of us don’t even really know the impact of what that money trouble will be because this is all so new. Now, if you’re somebody who’s been using buy now pay later services, we’re not telling you you need to change everything that you’re doing with your shopping and you’re spending. Just be a little bit more thoughtful about how these things can impact you. And if you’ve never use these services before, hopefully now you feel prepared to make a decision about whether you want to use this in the future, or not. Okay, that’s all I’ve got for this episode. Thank you so much for listening, and we will see you back next week.



Host – Yanely Espinal

Senior Producer – Hayley Hershman

Video Editors – Steven Byeon, Mallory Brangan

Producer – Hannah Harris Green

Sound Engineer – Bekah Wineman

Director of Podcasts – Bridget Bodnar

Executive Director – Francesca Levy

General Manager – Neal Scarbrough

Special thanks – Sy Syms Foundation, Donna Tam

Theme Music by Wonderly



Yanely: Hey! We really want to learn more about you, our Financially Inclined listeners. So we have a really quick and anonymous survey that you can take. You can click the link in the description box below (or on the Marketplace website) to take the survey, and you would be doing us a huge favor. So thank you very much!

“Financially Inclined” is Marketplace’s first video podcast and our first show for teens! Each week we talk with some really smart people, like influencers, high school students and financial experts, to help make learning about money fun and simple. Consider us your one-stop-shop for financial confidence.

The team

Hayley Hershman Senior Producer
Mallory Brangan Video Editor

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