Split a purchase into four payments? Easy. Buy Now Pay Later (BNPL) services sound harmless enough, right?

Buy Now Pay Later services sound harmless. Then LegalShield surveyed over 2,000 Americans about their BNPL habits, and the results were alarming. Not only are 76% of people using these services, but nearly half have missed at least one payment.

And with the holidays coming up? The numbers get even more concerning. Our research found that 46% of BNPL users plan to use it for larger purchases during the holidays than they normally would. Another 45% plan to use it more frequently for holiday gifts and purchases.

Think about that for a second. People who are already struggling with multiple BNPL payments are planning to take on bigger loans and use the service more often during the most expensive time of year.

That's when we knew we needed to dig deeper.

The reality check we needed

We recently sat down with Ashley Higginbotham and Christopher Stanton, two attorneys from our provider law firm Deming Parker, LLC, in Atlanta, who regularly help LegalShield Members navigate financial disputes. What they told us completely changed how we think about those innocent-looking "pay in 4" buttons.

Ashley shared something that hit home: "What I remind people, including my husband, is to look at the terms. Even if they say it's 0% interest, if you miss a payment, you'll have a late fee, a non-sufficient funds (NSF) fee from your bank, and the interest goes from 0% to usually 20% plus due to the default."

Wait, what? So that "zero interest" promise isn't quite what it seems.

It's not your parents’ layaway plan

Here's where things get interesting. Chris pointed out something many people don't realize: "People don't see Buy Now, Pay Later as a loan. They think it's like the old layaway, but it's different. With layaway, you paid first, then got the item. Now you get the item immediately but still owe the money."

That shift is huge. We're getting instant gratification without the instant payment, which fundamentally changes how we perceive what we're actually doing. We're taking out loans, not putting things on hold.

And here's the kicker: because these don't currently show up on credit reports, traditional lenders can't see when you're overextended. Chris mentioned he used BNPL for a home siding project with no payment due for 12 months. Sounds great, right? Except if he misses that 12-month mark, they charge 12% interest retroactively from day one. The company doesn't even send statements. They're essentially waiting for you to forget.

The holiday spending trap

With everything costing more these days and the pressure to keep up with holiday traditions, BNPL can sometimes feel like a lifeline. You want to get your kids something special, or you've always gotten your dad that one meaningful gift. But here's what Ashley said that really resonated:

"People don't count it as part of their budget. They see it as free money that's somehow there until the next month."

LegalShield’s research backs this up. The majority of BNPL users are carrying at least five loans simultaneously, with some managing up to seven. Imagine juggling seven different payment dates, all hitting on random days throughout the month. One comes out on the 4th, another on the 6th, one on the 15th. It's not aligned with your paycheck schedule. It's a recipe for missed payments.

What happens when you return something

What happens if you need to return that holiday gift? It’s an issue that may pop up more often than you think.

Ashley explained that they get calls about this regularly. "People return items to stores but haven't gotten money back from the financing company. The store has to communicate with the lender, which can take a long time, but your payments are still due."

So, you've returned the sweater to that retail store, you have the receipt, but you're still making payments to whatever payment installment company you’re using while everyone sorts it out. That's frustrating in July, but during the holiday rush? That's a nightmare.

The 3 things you need to know

We asked both attorneys: if someone's determined to use BNPL this holiday season, what should they absolutely keep in mind? Here's what they said:

First, set a real budget. Not a loose idea of what you'll spend, but actual numbers. Ashley was adamant about this one. "Set a budget. People don't count these as part of their budget."

Second, track everything obsessively. Write down every purchase, every payment date, every amount. Put reminders in your phone the day before payments are due. Include notes about what the payment is for, because when that $25 comes out next month, you won't remember if it's for your nephew's gift or your own winter coat.

Third, understand the real consequences. Chris put it simply: "This is not free money." If you miss a payment, you're not just facing late fees. You're looking at NSF fees from your bank, interest rates that can hit 30% or higher, and potentially compounding monthly interest. Ashley mentioned that some companies charge monthly interest rather than annual. That means 30% interest compounds every single month, similar to payday loans.

The privacy problem nobody talks about

Chris brought up something important: your data. These BNPL companies aren't always traditional financial institutions, and they're tracking everything you buy. They can sell that information. And because we all clicked through those terms and conditions without reading them (87% of Gen Z users admitted this in our survey), we've already given them permission.

So those targeted ads you start seeing? The unsolicited credit offers? That's your shopping data at work.

Here's what actually helps

Look, we’re not here to tell you never to use BNPL. Ashley herself mentioned using it, but with careful planning around when payments come out. The attorneys we spoke with aren't anti-BNPL. They're pro-information.

What they want people to understand is that you don't have the same consumer protections with BNPL as you do with credit cards. In most states, your rights are limited. California and New York have started implementing specific protections, but for most of us, we're operating in a gray area.

And here's the big one: The Fair Isaac Corporation announced they'll start factoring BNPL into credit scores this fall. That means missed payments that haven't affected your credit yet? They're about to start counting.

The main takeaway

After hearing from Ashley and Chris, it may be wise for you to look at holiday shopping differently this year. That doesn't mean you shouldn’t use BNPL ever, but ask yourself some different questions first:

• “Do I actually need this item, or am I clicking through because it's easy?”
• “Can I handle another payment schedule on top of everything else I'm managing?”
• “What happens if I need to return this?”
• “Have I actually read what I'm agreeing to?”

The holidays are stressful enough without adding financial complexity that could snowball into serious problems. And if you do find yourself in over your head, know that legal guidance is available. The situations Ashley and Chris described aren't rare. They're seeing them regularly, which means you're not alone if you're struggling.

This holiday season, the best gift you can give yourself might just be the gift of informed decision-making. Your future self will thank you.

Want to learn more about BNPL and how it works?

Read our complete guide: What Is Buy Now, Pay Later? A Complete 2025 Guide to BNPL Risks and Benefits

For detailed statistics from our research, check out our Buy Now, Pay Later survey results.

If you're facing disputes with BNPL companies or need help understanding your consumer rights, contact an independent associate to learn more about how a LegalShield Membership provides access to legal guidance for everyday financial matters.

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