Hidden fees and rising interest turn ‘buy now, pay later’ into costly loans

Buy-now-pay-later financing, originally marketed as a low-cost alternative to credit cards, is increasingly burdened with hidden charges and interest. A Protect Borrowers study found that 37% of BNPL loans carried interest in 2026, more than double the 2021 figure, and roughly half of users have missed a payment, triggering fees up to $17. Researchers observed that checkout designs often highlight the cheapest-monthly-payment option, which may actually have the highest interest rate, confusing shoppers.

Companies such as Sezzle, Klarna and Affirm defend their practices, citing disclosed fees and high on-time repayment rates, while consumer groups warn that low-income borrowers use BNPL for groceries, debt repayment and even gambling. The sector’s regulatory landscape remains unsettled after the CFPB’s interpretive rule was rolled back, leaving BNPL users without the full suite of credit-card consumer protections. Advocates are urging comprehensive rules to curb deceptive pricing and predatory practices.