Buy Now Pay Later

As of 2025, 49% of consumers use buy now, pay later services like Klarna. The average American owes more than $10,000, and the total U.S. credit card balance is now at a record-breaking $1.18 trillion. This isn't an accident. It's psychological engineering. We're breaking down the ways credit card companies and buy now, pay later apps use psychology to keep people spending so you can avoid falling into their traps.

Let's start with the basics. We're talking about two kinds of companies: traditional credit card companies like Visa, Mastercard, and American Express, and buy now, pay later services like Klarna, Afterpay, or Affirm. On the surface, they seem different. Credit card companies focus on credit cards—you probably have one in your wallet and barely think about it. Buy now, pay later services are newer, usually apps, and you’ll spot their logos at online checkouts. They let you spread the price of what you’re buying into smaller payments, often with no interest upfront. But underneath, both give you money now in exchange for paying later.

So, how do these companies make money? Every time you pay with a card, the company processing the payment takes a cut. For credit card companies like Mastercard or American Express, it’s usually 2 to 3% of the transaction. For buy now, pay later apps like Klarna or Afterpay, it’s higher—typically 4 to 6%. So, if you buy $100 sneakers, Visa or Klarna might take $3 to $6 before the store gets paid. Why would businesses give up that money? Imagine you’re shopping online and fill your cart with $100 worth of stuff but hesitate because you don’t have $100 to spare. Normally, you’d leave, and the store loses the sale. But then you see “make four interest-free payments of $25.” Suddenly, $100 feels manageable, so you buy. The store makes the sale, and Klarna takes its 6% for pushing you to buy. Studies show people using cards or BNPL spend more per transaction, buy impulsively, pay higher prices, and even tip more. That’s why stores pay 3 to 6%—they make more money overall.

The second way these companies profit is when things go wrong. Credit cards advertise 0% interest or no fees, but only if you pay on time. Miss a payment, and you face late fees, penalties, and high interest rates—some cards charge over 23%, the highest ever. BNPL apps are similar. You think you’re making four equal payments with no charges, but miss one, and you’re hit with fees, interest, and possible credit score damage. These companies make big money from their least reliable customers. For wealthy customers swiping for $10,000 dinners, they’re happy with the 3% commission and keep interest low. But if you’re buying groceries on credit or splitting a DoorDash order into payments, they’ll hit you hard for missing a payment. It’s like a casino: high rollers get VIP treatment, but the average person gets charged for everything. Most people don’t realize they’re on the losing side until it’s too late. The debt system rewards the wealthy and punishes those living on autopilot.

Now, let’s talk about the psychology of debt. Why are Americans carrying over a trillion dollars in credit card debt? Why do companies like Klarna have millions of users? Why are people financing fast food? It’s not just laziness or irresponsibility—these companies hijack how your brain works. The human mind wasn’t built for modern finance; it was built for hunting and gathering. Credit card companies and BNPL services exploit this.

First, there’s friction. Paying can feel heavy or like nothing, depending on how you pay. At a coffee shop, pulling out a $5 bill feels real—you see the money leave your hand. But tapping your phone for the same latte? It’s done in half a second. Studies show people spend more with cards because there’s less friction—no math, no fumbling with coins. Credit cards, Apple Pay, and Klarna aren’t just payment tools; they’re painkillers. When spending doesn’t hurt, you don’t slow down.

Then there’s dopamine activation. Buying something feels good—not when it arrives, but when you swipe or tap. That jolt of satisfaction is dopamine, your brain saying, “Nice job.” Spending in fast, low-friction ways triggers the same brain pathways as social media, sugar, or gambling. You chase that hit, not because you need the item, but because buying feels good. Credit and BNPL companies design their user experience to be addictive, so you lose control, not just money.

Next is present bias. Your brain doesn’t grasp “tomorrow.” When Klarna says “buy now, pay later,” it focuses on “buy now.” The easier, immediate option always feels better. Klarna makes buying easy and rewarding, hiding the “pay later” pain. They always get their money.

Underestimation bias is another trap. You think, “I’ll afford it next month,” like future you is a financial superhero, even if current you financed a burrito. Credit cards feed this optimism with spending limits you push, convincing yourself you’ll be fine later. But it feels temporary, and it’s not.

Then there’s financial denial. With credit cards, you know it’s a loan—you sign agreements. But with BNPL, shopping online and seeing “four easy payments” doesn’t feel like debt; it feels like a feature. There’s no loan officer or warning, but Klarna is still debt.

Algorithmic matching is next. Klarna uses algorithms to track your habits and tailor offers to make you click. It’s not random—it’s designed to feel irresistible, so you think it was your idea. Gamification is another trick. American Express gives you tiers—green, gold, platinum—like a video game. You “level up” by spending more. BNPL apps do this too: pay off purchases, and they raise your limit, making you feel trusted. It’s not a reward; it’s conditioning.

Finally, there’s cognitive overload. Every Klarna purchase is a separate payment plan you manage manually. One purchase is easy; four or five become a dozen mini-loans with different timelines. Your brain gets overwhelmed, avoids the mess, and you miss payments. This isn’t a flaw—it’s Klarna’s business model.

To wrap up, credit card companies and buy now, pay later apps exploit your psychology to get you into debt.

Even the companies you buy from use psychology to get your money.