In the rush to fund holiday shopping, millions of Americans clicked the "Pay in 4" button without a second thought. Now, as the bills come due in January, a troubling picture is emerging: the Buy Now Pay Later industry has grown into a $560 billion global market, but nearly half of users are struggling to keep up with payments—and most of this debt remains invisible to traditional credit systems.

The Scale of BNPL

Buy Now Pay Later services like Affirm, Klarna, and Afterpay have transformed how Americans shop. The concept is deceptively simple: split any purchase into four equal payments over six weeks, typically with no interest charges if payments are made on time.

What began as a niche offering for online purchases has exploded into a mainstream financial product. The global BNPL market reached approximately $560 billion in 2025, reflecting 13.7% year-over-year growth. Industry projections suggest continued expansion at more than 10% annually through 2030.

"BNPL has fundamentally changed consumer expectations," observed Lisa Ellis, payments analyst at MoffettNathanson. "An entire generation has grown up assuming they can pay for anything in installments, right at checkout."

The Hidden Delinquency Problem

Behind the growth numbers lies a more concerning reality. Data compiled by the Consumer Financial Protection Bureau reveals that between 34% and 42% of BNPL users have missed at least one payment—a delinquency rate far higher than traditional credit cards.

The discrepancy between industry claims and actual performance is stark. BNPL providers often cite 98% repayment rates among first-time borrowers, but this metric obscures the full picture. Repeat users, who represent the bulk of transaction volume, show significantly higher delinquency rates.

"There's a core group of users who are using BNPL as intended—splitting occasional purchases into manageable payments," explained Kathy Bostjancic, chief economist at Nationwide. "But there's another group that's using it to finance everyday expenses they can't otherwise afford. That's where the problems emerge."

The 'Phantom Debt' Phenomenon

Perhaps the most troubling aspect of the BNPL boom is what regulators call "phantom debt." Because most BNPL loans aren't reported to credit bureaus, they remain invisible to traditional lenders evaluating creditworthiness.

This creates a dangerous blind spot in consumer lending. A borrower could have multiple BNPL loans across different providers—a practice called "loan stacking"—and still appear creditworthy when applying for a mortgage or auto loan.

CFPB data shows that roughly 63% of BNPL borrowers originated multiple simultaneous loans at some point during 2025, while 33% took out loans from multiple BNPL providers. This stacking behavior suggests many users are not merely smoothing occasional large purchases but rather relying on BNPL to fund ongoing consumption.

"The credit system is flying blind," warned Rohit Chopra, CFPB Director. "Other lenders can't see when someone has taken out multiple BNPL loans. That introduces systemic risk we haven't fully quantified."

Who's Using BNPL—And Why It Matters

The demographics of BNPL usage reveal a concerning pattern. Research from the Kansas City Federal Reserve found that consumers who use BNPL tend to have riskier credit profiles: they're typically younger, carry higher debt burdens, and have lower credit scores than non-users.

There's also a strong correlation between BNPL late payments and broader financial vulnerability. Users who miss BNPL payments are significantly more likely to also miss rent payments, carry credit card balances month-to-month, and report financial stress.

"BNPL isn't creating financial stress—it's revealing it," noted researchers at the Richmond Federal Reserve. "These services make it easier for financially constrained households to access credit, but that access comes with risks that aren't always apparent at checkout."

The January Reckoning

The timing of the current stress is not coincidental. BNPL usage surged during the holiday shopping season, with services like Afterpay reporting transaction growth exceeding 25% compared to the prior year. As those six-week payment plans reach their final installments in January, delinquencies are expected to spike.

"January is always the month of reckoning for BNPL," observed Jason Mikula, a fintech analyst who closely tracks the industry. "People overextend during the holidays, and the bills come due just as credit card statements arrive and holiday bonuses have been spent."

The ripple effects extend beyond BNPL providers. Retailers that partnered with BNPL services to boost holiday sales could face increased return rates as cash-strapped consumers regret impulse purchases. The broader retail sector watches nervously as the post-holiday hangover unfolds.

Regulatory Response

Regulators on both sides of the Atlantic are taking action. In the United States, CFPB rules proposed in 2025 would require mandatory credit bureau reporting for BNPL loans, clearer disclosures about fees and late charges, and enhanced consumer protections.

The goal is to bring BNPL into the regulatory framework that governs credit cards and other consumer lending products. Under the proposed rules, BNPL providers would need to assess borrowers' ability to repay and provide regular account statements.

Australia has gone further, confirming that BNPL will fall under its National Consumer Credit Protection Act by 2026—ending the regulatory exemption that allowed the industry to grow largely unchecked.

Industry Pushback

BNPL providers argue that regulatory comparisons to credit cards are misguided. Unlike credit cards, they note, most BNPL products charge no interest if payments are made on time. Late fees, while they exist, are typically capped far below credit card penalties.

"BNPL gives consumers a more transparent, lower-cost alternative to revolving credit," argued Max Levchin, CEO of Affirm, in recent congressional testimony. "Regulation designed for credit cards doesn't fit our model."

Morgan Stanley's research supports part of this argument, noting that "the level of debt taken on through BNPL, as well as delinquency and default rates, are still very low compared to other types of consumer debt." The total BNPL market, measured in hundreds of billions, pales beside the $1.2 trillion credit card market.

What This Means for Consumers

For consumers, the message is clear: BNPL is a financial product, not a shopping perk. The ease of splitting payments can mask the total amount of debt being accumulated across multiple purchases.

Financial advisors recommend treating BNPL loans like any other debt obligation:

  • Track all outstanding BNPL balances across providers in a single spreadsheet or app
  • Budget for upcoming payments before making new BNPL purchases
  • Avoid loan stacking—if you can't afford to pay off existing BNPL debt, don't take on more
  • Consider the total cost including any late fees that might apply if payments slip

Looking Ahead

The BNPL industry isn't going away—the convenience factor is too compelling for both consumers and retailers. But the era of unchecked growth appears to be ending as regulators, lenders, and consumers themselves grapple with the hidden costs of frictionless credit.

"BNPL isn't yet a systemic threat," concluded the Richmond Fed's analysis. "But the lack of visibility into this debt—combined with its concentration among already-stressed borrowers—is worth watching carefully."

For millions of Americans opening their BNPL apps this January, that careful watching has become very personal indeed.