America loves buy now, pay later lending. But do these plans come with a catch? : Planet Money A wave of companies that allow customers to pay for items from their favorite stores in four interest-free installments has taken over the country. But is "buy now, pay later" lending too good to be true? | Subscribe to our weekly newsletter here.

Buy now, pay dearly?

Buy now, pay dearly?

  • Download
  • <iframe src="https://www.npr.org/player/embed/1097885472/1098930630" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Courtesy of Amelia Schmarzo
Amelia Schmarzo's "buy now, pay later" shopping haul.
Courtesy of Amelia Schmarzo

When Amelia Schmarzo's dad helped set up a credit card for her to use while away at college, he told her it was only for essentials and emergencies. And Amelia barely touched the card ... until she discovered a new kind of payment called "buy now, pay later."

The pitch was simple: get whatever you want now, and pay it back in four, interest-free installments. Suddenly, Amelia started buying all kinds of things using buy now, pay later. And she failed to notice that her small installments were quickly piling up. It only took a month before her credit card was maxed out.

Buy now, pay later companies like Klarna, Afterpay and Affirm have taken the country by storm ever since the pandemic fueled an online shopping explosion. But offering customers the option to pay for anything from clothes to oral surgery in interest-free installments sounds almost too good to be true, right?

Today on the show, what exactly is buy now, pay later? And should we be worried?

Music: "Retro Funk," "Comin' Back For More," "Reactive Emotion," and "EAT."

Find us: Twitter / Facebook / Instagram / TikTok

Subscribe to our show on Apple Podcasts, Spotify; and NPR One.

Want economics stories from the comfort of home? Subscribe to Planet Money's weekly newsletter.