The True Cost of Buy Now, Pay Later on Everyday Purchases

Fees, stacking and credit risks that a 0% promotion can hide, according to U.S. and Canadian government sources

Por Dorian Pike

Fees, stacking and credit risks that a 0% promotion can hide, according to U.S. and Canadian government sources

A checkout button that says you can split a purchase into smaller payments feels harmless, especially when the promotion advertises no interest. The sticker price, though, is only part of the story. The true cost of buy now, pay later on everyday purchases depends on fees, on what happens after a missed payment, and on how many plans you carry at once.

What Buy Now, Pay Later Actually Is

The Financial Consumer Agency of Canada (FCAC) describes buy now, pay later (BNPL) as financing a purchase with credit and spreading the cost over time. The agency separates it into two types: plans with equal installments, and deferred payment plans where the whole balance is due on a set date.

Where the Real Cost Hides

The promotional rate can be 0%, per the FCAC, but the cost shows up elsewhere. Late payments often trigger fees, and some providers charge an administrative fee when you make the purchase. If a plan pulls money from your bank account by pre-authorized debit and the balance is too low, you can face a provider fee plus a nonsufficient funds fee from your bank.

Store cards can carry an annual fee, and the rate can jump sharply after a late payment. The FCAC gives an example of a rate moving from 0% to 35%. Depending on the contract, interest may apply from the purchase date. The total you pay can end up higher than the store price.

Why the Risk Goes Beyond Fees

The FCAC also warns that BNPL can lead to excessive debt, impulse buying, and miscalculating the real cost of a purchase. Some card issuers also block BNPL transactions.

Credit reporting is another gray area. The FCAC says a provider may run a credit check, but its page does not explain how BNPL shows up on a credit report. The Consumer Financial Protection Bureau (CFPB) makes a related point for the United States: lenders typically do not report BNPL loans to the national credit reporting agencies, which limits the data available. Its researchers matched applications from six large BNPL companies with de-identified credit records.

What U.S. Data Shows About Heavy Use

The CFPB published a report on January 13, 2025, based on 2022 data. It found that 21.2% of consumers with a credit record financed at least one purchase with BNPL in 2022, up from 17.6% in 2021. About 20% of borrowers were heavy users, meaning they averaged more than one BNPL loan per month, compared with 18% in 2021. The average number of loans per borrower rose from 8.5 to 9.5.

The same report describes loan stacking. In 2022, about 63% of borrowers had several BNPL loans open at the same time at some point during the year, and 33% used more than one lender. Among consumers aged 18 to 24, BNPL made up 28% of unsecured debt in the months they borrowed, against 17% on average. The report also found that 78% of applications from subprime or deep subprime borrowers were approved. The CFPB announcement page does not give default rates.

A Closer Look at Who Borrows

An earlier CFPB study, published March 2, 2023, found that 17% of consumers with a credit record used BNPL in the previous year. Among borrowers, 18% had at least one delinquency on another account, compared with 7% of non-borrowers, with delinquency meaning 30 or more days late.

A companion analysis using the Making Ends Meet survey, also from March 2023, found that BNPL borrowers were more likely to use expensive credit such as overdrafts, payday loans, and pawn loans, to carry credit card balances. The CFPB estimates that most of them would face card interest rates of 19% to 23% a year. The agency cautions that many differences existed before BNPL, so this does not prove causation.

A Small Canadian Study, With a Caveat

The FCAC ran a pilot study surveying 1,034 adult Canadians between September 2019 and March 2021. Only 66 respondents (8% of the 806 who answered the usage question) had used BNPL, so the sample is small, and the FCAC itself says the results should not be generalized. Users said they turned to BNPL to help with budgeting (42%), because they could not pay upfront (39%), and to avoid interest and fees (23%).

About 44% found it hard to grasp the effect on their credit score, and 21% found it hard to understand penalties or interest for a missed or partial payment. Of those who finished paying, 95% (39 of 41) said they paid on time, yet 15% of those (6 of 39) made unfavorable trade-offs, such as using an overdraft or borrowing from relatives.

Your Turn: Which Purchase Would You Split?

Think about the last time you used, or considered, a split payment at checkout. Was the item something you needed, or something the smaller payments made easier to say yes to? If you hesitated, slow down before the next purchase.

What the U.S. Rules Say Right Now

On regulation, the CFPB’s compliance resources page states that the agency withdrew several guidance documents, including the 2024 BNPL Interpretive Rule, on May 12, 2025. It was withdrawn, and that is all this page says. It does not define BNPL or describe dispute or refund rights.

We did not find a current primary source explaining dispute and return rights for BNPL, and the FCAC page does not cover refunds either. Before you buy, read the contract and ask the provider how returns, refunds, and disputes work.

A Practical Way to Check the Cost

The FCAC suggests buying only what you need, confirming that you can cover every due date, reading the terms, and using its Budget Planner. Add up every possible fee and compare the total with the store price. If something goes wrong, the FCAC advises contacting the plan provider and the retailer first, if your contract requires it, and then the consumer protection office in your province or territory.

Frequently Asked Questions

Is buy now, pay later really free if the rate is 0%?

Not necessarily. The FCAC says a promotional rate can be 0%, but late payments often bring fees, some providers charge administrative or processing fees, and the total cost can exceed the store price.

Does buy now, pay later affect my credit?

The answer is unclear from the sources we reviewed. The FCAC says a provider may run a credit check but does not explain how BNPL appears on a credit report. The CFPB notes that lenders typically do not report BNPL loans to national credit agencies.

Can I return an item bought with a BNPL plan?

We found no current primary source that explains this, so we will not guess. Read your contract and ask the provider and the retailer how returns, refunds, and disputes are handled.

This content is for informational purposes only and does not constitute personalized financial advice. Terms and conditions change, so confirm the details with the official provider before making a decision.

Last reviewed: 2026-10-19

Sources consulted:

Dorian Pike
My curiosity has always guided me to what hides in plain sight: the invisible details behind the obvious, forgotten facts, and the questions no one remembers to ask.
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