The Psychology Behind ‘Buy Now, Pay Later’: How it Makes You Overspend

I’m what you might call a forager. TJ Maxx and Home Goods are my favorite stores, precisely because you never can be sure what you’re going to find. You don’t head into HomeGoods hoping to find something specific. You head to HomeGoods hoping something specific finds you.

My strategy for foraging is simple:

Step 1 – Walk in. Grab a cart.

Step 2 – Stroll each aisle in search of treasures not yet defined.

Step 3 – Identify potential goods and inspect for quality, usefulness, and last but not least, delightfulness.

Step 4 – Toss goods that pass inspection into the cart.

Step 5 – Remember that I’m trying to watch my spending

Step 6 – Audit my basket and get rid of all items that I don’t feel like paying for today.

Step 7 – Hit the checkout line with the items that passed audit.

Step 6 is, without a doubt, the most important part of my process. For all the joy I get from foraging, I physically seize up at the thought of too much money leaving my bank account at one time. The “too much” on any day is subjective. I know I’ve reached “too much” territory once the mental tally of price tags in my basket starts to make my heart race.

The distortion of step 6 is the reason I don’t care for Buy Now, Pay Later (BNPL) services like Affirm and Klarna.

When I get to step 6 of my foraging process, I may have $400 worth of nonsense in my cart. But I know good and well I’m not about to let $400 leave my bank account that day. So that forces me to get real about what I really want. Buy Now, Pay Later undermines the ‘get real’ process. If I can walk out the door with $400 worth of stuff while only giving you $40 today, I’m much more likely to checkout with my entire cart.

BNPL services and the retailers they partner with rely on psychology to get you to overspend. They know that most of us humans prioritize current gratification over future consequences. That’s what makes their offering so attractive. They minimize the pain points associated with shopping, which trick many of us in to believing we can afford to spend more than we actually can.

Like me, you may never walk out with a cart worth of $400 in knickknacks if you had to pay for it all that day. But $40 today and the rest plus interest later? Now that sounds like a deal.

All too often, that ‘deal’ turns into a trap. 34% of millennials and Gen Z’s report that they’ve spent more than they should have because of Buy Now, Pay Later. So how can you avoid falling into that trap? By adding ‘step 6’ to your shopping experience. Before you checkout online or otherwise ask yourself: would I still buy this if I had to pay for it in full today? If the answer is no, it might be time to ‘remove from cart’.