Buy now, pay later: The small-payment trap

It’s Sunday night and you’re scrolling through social media when an ad pops up: the jacket you’ve checked out three times this week, on sale, until midnight. The $360 price tag is still too high, but beneath the price, another option appears: pay in four instalments of $90 each, the first one now, the three others every two weeks. Suddenly, it’s in your budget range.

This is a tactic called “buy now, pay later” (BNPL). Over the last few years, it’s quickly become part of the daily spending habits of an entire generation.

It’s not a novel idea. Back in the day, your parents or grandparents likely paid for a fridge or a backyard pool in 12 interest-free, monthly instalments. But today, the practice is no longer limited to the larger purchases you plan ahead for. BNPL services are now seamlessly integrated into the checkout process of thousands of online retailers. According to Payments Canada, 26% of Canadians used this kind of service in 2025, with the majority of them between 18 and 34 years old.

On social media, influencers present BNPL as a smart way to manage your budget. But behind the promise of flexibility, a few shady areas are worth shining a light into.

For Florence*, a 30-year-old nursing student and mother of two, BNPL meets a real need. She can manage large purchases, like winter clothing for her children, without having to cough up a large sum all at once or pay interest on a credit card. “With this kind of service, I can buy essential items without taking on more debt,” she explains.

Although Florence manages to keep her monthly payments reasonably low – about $120 to $200 – she worries about her spending habits. She admits that she ends up spending more than she should using BNPL, and managing payments is more challenging than she would like. Thankfully, her partner is more of a “save before you buy” type, so that helps maintain some control over their budget. But needing to depend on somebody else makes her question her own financial habits. “I realize,” she admits, “that using BNPL requires not only considerable self-control but also a certain degree of financial literacy, which I didn’t necessarily have in the beginning.” She also says it doesn’t leave much room for saving. When she works extra hours, it's usually to pay off things she's already bought – not to set money aside.

Buy now, pay later is actually a short-term loan. You buy now, then you pay in two, three or four instalments that are automatically charged to your debit or credit card, generally every two weeks. Unlike a traditional credit card, most BNPL services don’t charge interest – at least not if you pay on time. But aside from that similarity, the two products don’t have much in common.

BNPL is presented as an alternative to a credit card. The conditions vary considerably from one provider to the next. For example, some providers charge an interest rate as high as 30%, depending on your credit score. Others charge late fees or may report a missed payment in your credit report.

Presenting BNPL in this way is precisely what makes these services a potential slippery slope. A number of risks are worth considering. First of all, the multiple payments: juggling three or four BNPL instalment plans at the same time makes it difficult to see what you’re really spending. Next, the risk of overspending: splitting a purchase into instalments makes it seem more affordable than it really is. Finally, hidden fees: if you pay late, you could get charged by both the BNPL provider and your financial institution.

For 28-year-old Olivia*, the temptation to buy now, pay later proved irresistible. As somebody who buys into the concept of retail therapy, she was seduced by the idea of splitting clothing purchases of $350 to $400 into four instalments. But the excitement was short-lived: “Once the initial high disappeared,” she says, “I began neglecting my payments.”

Olivia quickly got caught up in a vicious circle: between the clothes and a few other impulse buys, her payments sometimes climbed as high as $300 a month. A missed payment finally cost her access to one of these BNPL services. “It didn’t cause that much damage, but it was a warning sign,” she says.

This mishap changed her relationship with BNPL: today, she uses it primarily for major purchases that are planned in advance rather than bought on impulse. The instalments are automatically charged to her credit card, which she stays on top of, and her payments rarely exceed $50. She admits, however, that the temptation to use BNPL still lingers. “It’s tough to stop using this payment method. But I no longer use it on a whim. I wait 24 hours before buying to see if the purchase is really necessary.”

A credit report is a detailed record of your financial history that lenders use to determine if they can trust you (credit risk level). It contains personal and financial information, including your payment history, credit history, credit utilization ratio and the amount of your debt.

In Canada, there are two credit bureaus: Equifax and TransUnion. They collect the information that goes into your credit report.

Your credit report also contains your credit score. This score is generally somewhere between 300 and 900: the higher the score, the better your credit rating. Each credit bureau calculates the score using its own method, even though they base their calculations on comparable factors. That’s why the same person can have two different credit scores with Equifax and TransUnion.

You can check your Equifax and TransUnion credit reports at any time in the My Credit Report section on Desjardins mobile services or online (AccèsD).

You can also visit the Equifax and TransUnion websites:

• View your Equifax credit report
• View your TransUnion credit report

If you want to build a strong credit report and maintain a good credit score, you should practice sound financial habits and use credit responsibly. Here are some tips:

• Pay your bills and repay your debts on time. Set up automatic transfers or add reminders to your calendar, as needed.
• Avoid making too many credit applications and requests for higher limits.
• Aim to use less than 30% of your available credit. For example, if your credit limit is $1,500, try to keep your monthly balance under $500.
• Check your credit report regularly. Have any inaccurate information corrected if necessary.

Avoid behaviours that can harm your credit score, such as:

• Paying your bills or debts late – or worse, failing to make the required payment
• Making a lot of credit applications or requests for higher limits, especially over a short period
• Using all of your available credit or regularly maintaining a balance close to your authorized limit
• Allowing a debt to be referred to a collection agency because of non-payment
• Declaring bankruptcy or submitting a consumer proposal

For more information on your credit report, consult the page: Key things to know about your credit report.

Between Florence, who uses buy now, pay later with caution while recognizing its limits, and Olivia, who needed to regain control of it after slipping up, the picture is the same: BNPL is neither a miracle tool nor an inevitable trap, but a product designed to make credit simple, quick and almost invisible. This invisibility makes it a strength for retailers and a danger for consumers. When a $360 purchase becomes four $90 instalments, you might ask yourself, “Can I afford these payments?” But that’s not the whole question. What you should be asking is: “Would I buy this if I had to pay for it in full today?” If the answer is no, it might not be the instalments you need to reconsider, but the purchase itself.

* Each testimonial was collected with the prior consent of its author.