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Planet Money
Planet Money

Buy now, pay dearly? (update)

November 12, 2025 • 25m

Summary

⏱️ 6 min read

Overview

Planet Money investigates the explosive growth of Buy Now, Pay Later (BNPL) services, following the story of college student Amelia Schmarzo who fell into a spending spiral during the pandemic. The episode examines how these companies make money despite offering interest-free loans, why retailers are willing to pay higher fees than credit cards charge, and the potential dangers of this unregulated form of credit—particularly for younger consumers who can easily overextend themselves across multiple platforms.

Amelia's Buy Now, Pay Later Shopping Spiral

During pandemic lockdown in spring 2020, college student Amelia Schmarzo discovered Buy Now, Pay Later while following fitness influencers. What started with a $200 bikini split into four payments of $41.99 quickly escalated into a spending addiction. The psychological trick of seeing only the installment amount made expensive purchases feel affordable, leading her to max out her credit card and drain her checking account within weeks.

  • Amelia discovered BNPL during pandemic lockdown while following social media influencers, starting with a $200 bikini
  • The four payments of $41.99 made the expensive bikini feel affordable and like 'free money'
  • Shopping addiction escalated over days, not weeks, with purchases feeling like 'Monopoly money'
  • Reality hit when her credit card statement showed $2,000 (her limit) and her debit account dropped from $700 to $20
" I was like, wow, I'm paying $41 for a $200 bikini. Like, I am a genius. "
" I'm not going to lie, it felt free. Like, it literally felt like free money because I didn't see it. It wasn't cash. I don't know. It just felt like it was never going to catch up. It just all felt like Monopoly money. "
" I would say days, to be honest. "

The Business Model Behind Buy Now, Pay Later

Federal Reserve researchers Terry Bradford and Julian Alcacar investigated how BNPL companies profit despite offering interest-free loans. The surprising answer: they charge merchants 4-9.5% per transaction—often double what credit cards charge. Retailers accept this because BNPL reduces cart abandonment, attracts customers without credit cards or with bad credit, and increases overall sales by making large purchases feel smaller.

  • BNPL companies charge merchants 4-9.5% per transaction, roughly double what credit cards charge
  • Merchants accept higher fees because BNPL reduces cart abandonment by making large purchases seem smaller
  • BNPL targets people without credit history, bad credit, or those reluctant to use credit cards—especially Gen Z
  • Merchants get new customers who likely wouldn't have bought without BNPL, plus younger customers who may return as they earn more
" It's credit by another name. That's what it is. "
" What Buy Now, Pay Later does, it actually reduces cart abandonment because it makes large purchases seem smaller to the consumer. "

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