As Americans accumulate unprecedented levels of household debt, the unstoppable trend of buy now, pay later (BNPL) options continues to gain traction. Currently, around 15 percent of consumers report utilizing these popular installment plans to finance a wide range of purchases, from DoorDash meals to tickets for Coachella.
The latest development in this evolving landscape? Just last week, both Klarna and PayPal unveiled new cobranded cards aimed at transforming their traditionally virtual BNPL offerings into practical solutions for everyday shopping, both online and in physical stores.
However, as BNPL plans become more intertwined with consumers’ daily spending patterns, the potential for accumulating debt rises significantly. The convenience of splitting payments—even for modest purchases—can blur the line between a beneficial budgeting tool and a detrimental debt trap, particularly for individuals already walking a tightrope financially.
“It’s creating a cycle of dependency,” explains Alaina Fingal, a certified accountant and owner of The Organized Money. “Once consumers begin to rely on BNPL for essentials like groceries or gas, it can foster a reliance on loans to meet short-term everyday needs.”
Klarna and PayPal Compete to Enhance In-Store Shopping Experiences
Earlier this month, Klarna initiated the rollout of the Klarna Card, a newly introduced debit card issued by WebBank based in Utah. This innovative card empowers users to activate Klarna’s well-known Pay in 4 and Pay Later plans at over 150 million retailers that accept Visa. Although Klarna has been testing plastic payment options since 2022, it only launched its physical credit card in the U.S. last year.
Unlike Klarna’s traditional credit card, the new debit card—currently in a trial phase in the U.S.—is specifically designed for everyday expenditures, integrating functionalities such as real-time transfers and direct deposits to extend its reach beyond BNPL transactions.
“We consistently receive feedback from consumers who desire the flexibility to choose how and when they pay—whether that means making immediate payments with debit or spreading costs over time,” stated David Sandström, chief marketing officer, in a recent press release.
On June 3, PayPal introduced its own exciting offering: a physical credit card issued by Synchrony Financial that enables users to utilize PayPal Credit anywhere Mastercard is accepted, including in stores.
PayPal Credit functions as a revolving line of credit, similar to a traditional credit card, allowing users to maintain a balance and incur interest over time. This new card also provides “customers seeking flexibility” with the option to apply for a BNPL-style loan at checkout, as noted in a press release.
The introduction of these cards represents more than just an expansion of payment options. It signifies a strategic pivot by Klarna and PayPal to gain traction in the area where the majority of shopping occurs: physical retail. While BNPL solutions have flourished in online transactions, their presence in brick-and-mortar stores has been relatively limited, which still constitutes a significant portion of U.S. retail sales.
By integrating BNPL features into the simple act of swiping (or tapping) a card in a physical store, these companies claim they are empowering consumers with greater control over their payment methods. However, this also raises concerns about making it easier for individuals to slip into debt, particularly concerning daily necessities.
Traditionally, BNPL options have primarily existed in digital formats, leading you to ponder the idea of splitting a $40 shopping trip at Target into four manageable $10 payments. With a physical card now available in your wallet, it becomes increasingly tempting to reach for it at the checkout counter, even if there’s no pressing need to spread payments over time.
This convenience can disproportionately impact financially vulnerable individuals, who already represent a significant portion of BNPL users and frequently depend on credit to fill income gaps. For those living paycheck-to-paycheck, the ability to divide payments can be particularly alluring.
Understanding the Hidden Dangers of Buy Now, Pay Later Plans
In the last two decades, companies like Klarna, Affirm, and Afterpay have marketed buy now, pay later solutions as a low-risk alternative to traditional credit cards—a trend that gained momentum during the pandemic. Unlike conventional credit cards, BNPL services often provide interest-free installment payments and immediate approval, making them particularly appealing to budget-conscious shoppers.
However, the “pay later” promise can alter consumers’ perceptions of money and spending. As short-term lending options evolve and proliferate, experts caution that they can lead consumers into precarious financial situations—especially when used to finance essential expenditures.
“It’s a powerful psychological tool that enables consumers to justify taking on debt and presents it as desirable or even prudent,” asserts Jason Steele, a credit card specialist. “Paying now helps avoid debt and interest charges, even if it may not seem attractive at first glance.”
Because BNPL plans typically split total payments into smaller, more digestible portions, they can create a false sense of manageability.
However, juggling multiple BNPL plans can quickly escalate into chaos. For instance, Klarna’s Pay in 4 allows users to divide their payments into four installments. If you find yourself relying on this payment method multiple times each week, you could end up managing numerous payments throughout the month—making it easy to lose track of due dates, overextend your budget, and incur late fees due to missed payments.
Ultimately, as Fingal points out, this pattern can foster poor spending habits, prompting individuals to purchase items they cannot afford. In fact, a survey conducted by the Federal Reserve in May revealed that 24 percent of BNPL users fell behind on payments last year.
While spreading out payments may seem beneficial at first, it carries risks that are easily overlooked. So, if you are contemplating one of these new BNPL cards—whether from Klarna, PayPal, or any future provider—exercise caution. Although these offerings can provide short-term flexibility, they should not be relied upon to cover ongoing financial shortfalls.
“If you cannot afford to pay for something in full today, seriously evaluate whether you can wait or save up,” advises Fingal. “While Klarna and PayPal’s BNPL tools offer convenience, such convenience can come at the expense of your future financial wellbeing.”
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