Buy now, pay later (but add extra guac)

We’ve all been there: it’s been a long day and making dinner is the last thing you want to do, and a delicious meal delivered straight to your door is only a few taps away. Recently, DoorDash^® teamed up with Klarna, a fintech company offering buy now, pay later (BNPL) services, making ordering food even easier. No immediate hit to your checking account—what’s not to love?

BNPL has similarities to the infomercials of yesteryear that tried to sell kitchen pots and pans in several payment installments. But before making that impulsive late-night order, think about whether you want the kind of debt that sneaks up when using BNPL to finance takeout meals: "burrito debt." 

Michela Allocca, the voice behind Break Your Budget¹ and a go-to source for online financial advice, explains, "BNPL can create the illusion that something is cheaper than it really is. I think it’s especially appealing to Gen Z, who are more likely to jump into these things without realizing how quickly small purchases can add up."

BNPL has been around for a while—Klarna, for instance, was founded in 2005—but it’s gained huge momentum in recent years. Ted Rossman, senior industry analyst at Bankrate¹ (which reports that “about half of buy now, pay later users have experienced issues like overspending and missing payments,” according to a recent survey), said this surge in popularity is partially thanks to uncertainty that arose from the pandemic, which led people to turn to alternative payment methods to aid financial unease. 

“The biggest reason people use BNPL is to spread out their cash flow,” says Ted. “BNPL has really been having a moment, especially these last few years. It's interesting because some of these providers have been around a while. It takes a little while to get market traction and acceptance, but really, the pandemic was a big tailwind for them.” 

So, what's the appeal? It’s simple: BNPL lets you split your payments into manageable, often interest-free chunks. Not to mention, it lessens the up-front sticker shock. Whether you’re buying groceries, electronics, or (yes) late-night food delivery, BNPL makes it easy to grab what you want, then worry about the cost down the line. 

However, BNPL is still debt, just like a credit card. 

In addition to consumerism popularizing BNPL, it’s also become an easy option for young people who may not have access to traditional credit. Young people can become especially impacted by the payment plan’s pitfalls if they’re also paying off student loans and other expenses that often come with just starting out. 

“At the end of the day, I come back to this analogy: credit cards can be like power tools,” says Ted. “They could be really useful or dangerous. It’s all about how you use them.” 

Both Michela and Ted agree that there are perks to BNPL, but it’s all about being strategic. Here are some tips for using BNPL responsibly:

1. Create a budget and set clear limits for things like takeout, subscriptions, and those tempting little splurges.
2. Weigh the pros and cons of what you’re trying to purchase with BNPL. “You could get $50 a month for a few years on a refrigerator or an exercise bike or a couch. And maybe that's a smart financial decision if it spreads out your cash flow, and you get a good low or no interest deal,” explains Ted.
3. Not all debt is created equal, so prioritize your payments. Focus on paying off high-interest debt first, whether it’s credit cards or lingering BNPL bills.
4. The easiest way to avoid missing payments? Set it and forget it. Automate your BNPL installments, so you don’t accidentally get hit with late fees.
5. Avoid using BNPL for small purchases. "Don't do it—you should not be financing a burrito,” Michela advises.