‘Buy now, pay later’ might be driving up costs

The Buy now, pay later (BNPL) model has become a staple for many shoppers, offering the flexibility to break down purchases into manageable installments. However, a recent report is raising questions about whether this convenience comes with a hidden cost—namely, higher prices at the checkout counter.

Are Consumer Fees Impacting Your Wallet?

A report published by consumer advocacy group Protect Borrowers suggests that BNPL providers like Klarna and Sezzle impose significant costs on retailers. According to the findings, the fees charged to merchants can reach up to three times the cost of standard swipe fees typically associated with credit card transactions.

The report argues that when combined with late fees, these merchant expenses create a financial burden that businesses may ultimately pass on to consumers through higher retail prices. Industry leaders, however, strongly dispute these claims. Phil Goldfeder, CEO of the American Fintech Council, told Payments Dive that there is no evidence to support the assertion that merchant fees are being offloaded onto shoppers.

A Growing Trend with Rising Risks

Despite the debate, the popularity of BNPL is surging. Data from a recent LendingTree survey indicates that 44 percent of Americans plan to use a BNPL loan within the next six months, with interest peaking among millennials and Gen Z at 49 percent.

However, the convenience is clashing with reality for many borrowers. The survey shows that 47 percent of respondents reported being late on at least one payment in the past year—a steady climb from 41 percent in 2025 and 34 percent in 2024. For those who fall behind, the financial sting can be severe; 24/7 Wall St. reports that late fees can effectively function as an APR of 100 percent or more.

Calls for Regulation

As more families rely on these services to afford essential items like groceries, advocates are pushing for legislative action. The report from Protect Borrowers calls on Congress and state regulators to implement stricter protections against what it describes as predatory practices, junk fees, and data privacy concerns. The organization emphasizes that with more working families turning to high-cost debt to make ends meet, robust oversight is needed to protect consumers from these evolving financial hazards.