BUY-NOW-PAY-LATER IS MAKING YOU BROKE: THE PSYCHOLOGICAL TRAP THAT'S EMPTYING YOUR BANK ACCOUNT

Discover how the buy-now-pay-later (BNPL) payment method tricks your brain into spending more than you can afford. Backed by Macquarie University research, learn the psychological mechanisms behind BNPL spending and how to protect your financial future.

You know that feeling when you're about to buy something, and right before you click "purchase," a little voice in your head whispers, "You probably shouldn't." That voice? That's your financial survival instinct. That's generations of human caution encoded in your DNA. That's the only thing standing between you and financial ruin.

 

But here's the problem: buy-now-pay-later services have figured out how to silence that voice completely.

 

I'm not here to sell you on some get-rich-quick scheme or tell you to cut up all your credit cards and live in a cave eating beans. I'm here to show you the truth about how these modern payment methods are rewiring your brain—and not in a good way.

 

Let me take you inside some groundbreaking research that proves exactly why you're spending more than you realize when you use buy-now-pay-later. And more importantly, I'm going to show you how to take back control.

 

THE RESEARCH THAT EXPOSED THE TRUTH

 

Back in 2019, a researcher named Rhys Ashby at Macquarie University in Australia asked himself a question that should concern every single one of us: What actually happens inside our brains when we use buy-now-pay-later services?

 

You see, the Australian government had just released a report showing that 64% of consumers admitted they spent more when using buy-now-pay-later. But here's the thing about self-reported data—people are terrible at knowing why they do what they do. We're walking around with all these blind spots, convinced we're rational creatures making logical decisions, when in reality, our brains are being hijacked by forces we don't even understand.

 

So Ashby designed three experiments to get to the bottom of it. And what he found should make you sit up straight in your chair.

 

But before I dive into the research, let me ask you something: Have you ever bought something with Afterpay, Klarna, or Zip and thought, "It's only four payments of $25—that's basically nothing"?

 

THE NUMEROSITY TRAP: WHY YOUR BRAIN CAN'T DO MATH

 

Here's where it gets interesting. There's this thing in psychology called the numerosity effect. It's a fancy term for something embarrassingly simple: humans judge quantities based on numbers, not units.

 

Let me give you an example. Which weighs more: 4 kilograms or 4,000 grams?

 

If you're like most people, your gut says 4,000 grams weighs more. But it's the exact same thing. Your brain latches onto the bigger number—4,000—and ignores the unit—grams. You know better intellectually, but your gut feeling doesn't care about your intellect.

 

Now apply this to money.

 

When you see a $100 item priced as four payments of $25, your brain doesn't process $100. It processes $25. Four times. But each time, it's just $25. And $25 feels like nothing. It feels like dinner out. It feels like a few drinks with friends. It feels... manageable.

 

This is not an accident. This is by design.

 

The researchers found that participants who saw prices as instalments perceived the purchase as significantly less expensive than those who saw the total price. Same item. Same total cost. Different perception.

 

And here's the kicker: this lower perceived expensiveness led to lower pain of payment.

 

THE PAIN YOU DON'T FEEL ANYMORE

 

Let me tell you about pain—specifically, the pain of paying.

 

When you hand over cash for something, there's this physical sensation of loss. You feel the bills leave your hand. You see your wallet get thinner. Your brain registers: Something valuable just left my possession.

 

That pain? It's there for a reason. It's your brain's way of saying, "Hey, are you sure about this? Because once this money is gone, it's GONE."

 

But credit cards started dulling that pain years ago. Instead of handing over physical money, you swipe a piece of plastic. The pain still exists—you'll feel it when the bill comes—but it's delayed. It's muffled. It's like wearing noise-cancelling headphones while someone tries to warn you about a cliff.

 

Buy-now-pay-later takes this to an entirely new level.

 

In Study 2 of the research, participants were asked about getting a dental filling for $180. Half were told they'd pay cash. Half were told they'd use buy-now-pay-later—four payments of $45.

 

The results? The cash group felt significantly more pain about paying. They rated the purchase as more expensive. They were less likely to go through with it.

 

The buy-now-pay-later group? They felt just fine about the whole thing. The pain was gone. Poof. Vanished.

 

And here's what scares me: The researchers ran the numbers through a mediation analysis and found that the entire effect was explained by perceived expensiveness and pain of payment. In plain English: BNPL doesn't just make paying easier—it literally changes how expensive things seem to you.

 

 

THE FOUR EXPERIMENTS THAT PROVE YOU'RE BEING MANIPULATED

 

Let me walk you through what the researchers actually found, because the numbers tell a story that should make you angry.

 

 Study 1: The Party Menu

 

Sixty people were asked to order food for a party. Half were told they'd pay with credit cards. Half were told they'd use buy-now-pay-later. The menu showed the same items, but the BNPL group saw each item with its instalment price—"$58 or 4 payments of $14.50"—right next to it.

 

The BNPL group spent 19.5% more money. They ordered more items. They didn't buy more expensive items—they just bought MORE. More food they probably didn't need. More waste. More future payments.

 

And before you say, "Well, that's just because BNPL is new and novel," the researchers checked for that. They measured price novelty. There was no significant difference. This wasn't about shiny-object syndrome. This was about the numerosity effect in action.

 

 Study 2: The Dentist Visit

 

One hundred people were asked about getting a dental filling for $180. Half would pay cash. Half would use BNPL—four payments of $45.

 

The BNPL group rated the purchase as less expensive (3.92 vs. 4.71 on a 7-point scale), felt less pain about paying (2.76 vs. 4.43) and were significantly more likely to go through with the purchase (5.55 vs. 4.80).

 

Think about what that means. A necessary medical procedure—something that could prevent future pain and more expensive treatment—was significantly more likely to happen when people could trick themselves into thinking it cost less than it actually did.

 

But here's the part that keeps me up at night: The researchers ran a serial mediation analysis. They found that the entire effect of BNPL on purchase intent was explained by perceived expensiveness and pain of payment. The payment method itself didn't matter once you accounted for how expensive people thought the purchase was and how much pain they felt.

 

This means BNPL doesn't make you spend more because it's convenient or because you don't have the money now. It makes you spend more because it literally changes your perception of reality.

 

 Study 3: The Hotel Room

 

Three hundred people were asked to choose between two hotel rooms for a weekend getaway. One was $216 for three nights. One was $288—33% more expensive.

 

But here's the twist: Half the people saw the prices as four payments ($54 vs. $72). Half saw them as eight payments ($27 vs. $36). Same total prices. Same difference between rooms. Different number of payments.

 

When people saw eight payments instead of four, significantly more chose the expensive room.

 

Why? Because the difference between $27 and $36 feels smaller than the difference between $54 and $72. Even though the actual difference is the same—$18 per payment, $72 total—the smaller numbers make the price gap seem less significant.

 

The researchers found that:

·       People in the eight-payment condition perceived the expensive room as relatively less expensive

·       They felt less pain about paying for it

·       They were more likely to choose it

 

Let that sink in. The exact same financial decision—the same total cost, the same difference between options—led to completely different choices based solely on how the numbers were presented.

 

This isn't economics. This isn't rational choice theory. This is your brain being hacked by people who've spent millions figuring out how to separate you from your money.

 

 

WHY THIS MATTERS FOR YOUR FINANCIAL FUTURE

 

I'm going to be blunt with you: The financial services industry doesn't care about you. They care about transaction volume. They care about user engagement. They care about shareholder value. And they've discovered that the best way to increase all of those things is to make spending feel like nothing.

 

But here's what they're not telling you: The money still leaves your account. The payments still come due. And when you stack multiple BNPL purchases across multiple providers—which 5 in 6 users do, according to the research—you're building a house of cards that will eventually collapse.

 

The Australian Securities and Investments Commission found that the average BNPL arrangement is $178. That seems small, right? But the average credit card limit is $9,500. That also seems manageable—until you realize that most people can't pay off their credit cards in full each month.

 

Here's what the numbers actually look like in practice:

Payment Method	Typical Balance	Repayment Frequency	Minimum Payment
🛍️Buy-Now-Pay-Later	$178	Every 2 weeks	25%
💳 Credit Cards	$3,200	Monthly	3%

 

 

See what's happening? BNPL gets you in the door with small amounts and fast repayments. It feels safe because the payments are small and frequent. But when you have five, six, seven of these arrangements running simultaneously—and the research shows this is common—you're suddenly managing a complex web of payments that can easily spiral out of control.

 

And unlike credit cards, BNPL providers don't verify your ability to repay. No credit checks. No income verification. Just instant approval and the implicit promise that you'll figure it out later.

 

 

THE PSYCHOLOGICAL TRAP IN SLOW MOTION

 

Let me paint you a picture of how this actually plays out in real life.

 

Month One: You buy a pair of shoes for $100. Four payments of $25. No big deal. You've got $25 in your account right now. The next payment is two weeks away. Plenty of time.

 

Month Two: You're at the store and see a jacket you've wanted. It's $120. Four payments of $30. You think about the shoes—you're handling those payments just fine. What's one more? You click "buy."

 

Month Three: Your friend's wedding is coming up. You need a gift. You find something perfect for $80. Four payments of $20. At this point, you've got three BNPL arrangements running. Total monthly payment commitment: $75 spread across different schedules. But each individual payment feels small, so you don't notice.

 

Month Four: Your car needs repairs. Unexpected, unavoidable. $400. The shop offers BNPL. Eight payments of $50. You're stressed about the car, so you take it. Now you're up to four arrangements. Your weekly payment commitment has quietly climbed to over $100.

 

Month Five: You miss a payment. Late fee: $10. Then another. Another $10. Your credit score takes a hit. The stress starts building. But here's the thing—you don't connect the stress to the BNPL purchases because each one seemed so small at the time.

 

This is how financial ruin happens in slow motion. Not with one big purchase, but with dozens of small ones, each one justified by the same thought: "It's only four payments of..."

 

 

THE MATH THAT MATTERS

 

Let me show you what this actually costs you.

 

Take that $100 purchase—four payments of $25. If you put that on a credit card with 18% APR and paid the minimum each month, you'd pay about $102.50 total. Not great, but manageable.

 

With BNPL, if you make all payments on time, you pay exactly $100. That's actually better than credit cards. The trap isn't in the interest—it's in the behaviour.

 

Here's the real math:

 

Scenario A: You buy one item for $100 using BNPL. Four payments of $25. You pay on time. Total cost: $100.

 

Scenario B: You buy five items over six months, each $100, using BNPL. Now you're managing twenty separate payments across five different schedules. Your average outstanding balance is $250. You miss one payment—$10 late fee. You miss another—another $10. You lose track of when payments are due and overdraft your account—$35 bank fee. Suddenly that $500 in purchases has cost you $555, and you've got nothing to show for it except five items you probably didn't need.

 

The interest isn't the problem. The fragmentation of attention is the problem. When you break one $500 decision into twenty $25 decisions, you stop making decisions at all. You just react.

 

 

WHAT THE RESEARCH DIDN'T TELL YOU

 

The Macquarie study is brilliant, but it only covers what happens at the moment of purchase. Here's what we still don't know—and what you need to watch out for:

 

The Stacking Effect: The research shows that BNPL increases spending on individual purchases. But what happens when consumers use multiple BNPL services simultaneously? The Australian data suggests this is the norm, not the exception. When you're managing payments across Afterpay, Klarna, Zip, and PayPal Pay in 4, you're not just managing money—you're managing a complex logistics operation. And humans are terrible at that.

 

The Budget Blindness: The researchers note that their studies didn't make budgets salient. In real life, you have rent, utilities, groceries, and savings goals. When BNPL payments start competing with those fixed obligations, something has to give. Usually, it's savings. Then it's groceries. Then it's rent.

 

The Quality Illusion: Here's something the research hints at but doesn't fully explore: When things seem less expensive, we also assume they're lower quality. What happens when you buy a premium product using BNPL? Does the lower perceived price undermine the brand's prestige? Does it change how you feel about owning it? The researchers suggest this could be a real problem for luxury brands, but it's also a problem for you. If you buy something expensive but perceive it as cheap, do you value it less? Take care of it less? Replace it sooner?

 

The Post-Purchase Connection: Shah and colleagues found in 2016 that more painful payments increase psychological connection to purchases. When you work hard for something, save up, and finally buy it, you treasure it. When you click a button and it shows up two days later with payments spread out over two months, do you feel the same connection? Probably not. And when you don't feel connected to your possessions, you buy more to fill the void.

 

 

HOW TO TAKE BACK CONTROL

 

I've spent this whole article showing you how the system is rigged against you. Now let me give you something useful: a practical plan to protect yourself.

 

 1. Reframe Every Instalment as Total Price

 

This is non-negotiable. Every time you see "four payments of $X," immediately calculate the total. Write it down. Say it out loud. Make it real.

 

Better yet, convert it to hours of work. If you make $25 an hour after taxes, that $100 purchase isn't $25 four times—it's four hours of your life. Would you trade four hours at your desk for those shoes? Maybe you would. Maybe you wouldn't. But at least you're making a conscious choice.

 

 2. Create a Unified Payment Tracker

 

If you're using BNPL, you need a single place where every payment is tracked. A spreadsheet. An app. A notebook. Whatever works. But you need to see, at a glance, exactly how much money is leaving your account each week and when.

 

The research shows that fragmentation is the enemy. When you can see all your payments in one place, you regain perspective. That $25 payment for shoes, $30 for a jacket, and $20 for a gift suddenly look like what they are: $75 leaving your account this week.

 

 3. Implement a 48-Hour Rule

 

Here's a simple rule that will save you thousands: Never use BNPL for an impulse purchase. If you see something you want, wait 48 hours. Put it in your cart. Calculate the total cost. Think about where that money would come from if you had to pay it all today.

 

If you still want it after 48 hours, and you've accounted for it in your budget, buy it. But most things won't survive that 48-hour window. The urgency will fade. The numerosity effect will wear off. And you'll realize you didn't need it at all.

 

 4. Budget by Week, Not by Month

 

Most people budget monthly because that's when bills come due. But BNPL payments happen weekly or bi-weekly. If you're budgeting monthly, you're missing the timing mismatches that cause overdrafts and late fees.

 

Instead, budget weekly. Know exactly how much money is coming in each week and exactly how much is going out. When you see that your BNPL payments for the week total $150 and your weekly income is $800, you have clear information about whether you can afford that next purchase.

 

 5. Cap Your Active Arrangements

 

Decide ahead of time how many BNPL arrangements you'll allow at once. Two? Three? Zero? Write it down. Stick to it.

 

When you reach your cap, you have to pay something off before you buy something new. This creates natural friction in the spending process—friction that gives your rational brain time to catch up with your impulsive brain.

 

 6. Connect Payments to Consumption

 

One of the researchers' insights is that BNPL decouples payment from consumption. You get the item now, but you pay for it later, in small chunks. This breaks the natural feedback loop that helps you learn from your spending.

 

To fix this, create your own coupling. Every time you make a BNPL payment, look at the item. Touch it. Remember why you bought it. Ask yourself if you'd make the same decision today.

 

If the answer is no for three consecutive payments, sell the item. Cut your losses. Learn the lesson.

 

 

 THE MINDSET SHIFT THAT CHANGES EVERYTHING

 

Here's the truth that no financial advisor will tell you: You don't have a money problem. You have a perception problem.

 

You're not bad at math. You're not irresponsible. You're not weak-willed. You're human. And you're operating in an environment that's been deliberately designed to exploit every cognitive vulnerability you have.

 

The numerosity effect isn't a character flaw—it's a feature of how human brains work. The pain of payment isn't something you can just will away—it's an evolved mechanism that kept your ancestors alive. BNPL services aren't evil for exploiting these mechanisms—they're just playing the game they're designed to play.

 

But here's the thing: once you understand how the game works, you can change how you play it.

 

The men who build wealth over generations aren't smarter than you. They aren't more disciplined than you. They've just figured out that financial success is 10% math and 90% psychology. They've learned to recognize when their perception is being manipulated and adjust accordingly.

 

You can do the same.

 

Start small. Next time you're about to click "buy" on a BNPL offer, pause. Ask yourself: Would I buy this if I had to pay cash today? Would I buy this if I had to work an extra shift to afford it? Would I buy this if my grandmother was standing next to me watching?

 

The answers might surprise you.

 

 

 THE BOTTOM LINE

 

The Macquarie University research proves what many of us have suspected: buy-now-pay-later isn't just a payment method—it's a psychological tool that changes how you perceive value, cost, and your own financial reality.

 

When you use BNPL, you're not just deferring payment. You're deferring the pain of paying. You're fragmenting large decisions into small ones that your brain doesn't take seriously. You're trading long-term financial health for short-term gratification.

 

And here's the thing that really gets me: the people designing these systems know exactly what they're doing. They've spent millions on research—research just like this study—to understand exactly which levers to pull to get you to spend more. They know about the numerosity effect. They know about pain of payment. They know that four payments of $25 feels like less than $100, even though it's exactly the same.

 

They're playing chess while you're playing checkers.

 

The good news is: once you understand the game, you can start playing chess too. You can recognize when your perception is being manipulated. You can build systems that protect you from your own cognitive blind spots. You can make conscious choices instead of reacting to cleverly designed triggers.

 

It starts with awareness. It continues with action. And it pays off in freedom—freedom from debt, freedom from financial stress, freedom from the constant feeling that you're falling behind.

 

The choice is yours. You can keep playing their game, making small payments that add up to big regrets. Or you can step back, see the board clearly, and start making moves that actually serve you.

 

Which will it be?

 

 

 YOUR NEXT MOVE

 

I've given you the research, the numbers, and the practical steps. Now it's your turn.

 

Take five minutes right now and log into every BNPL account you have. Add up your total outstanding balance. Write down every upcoming payment date. Calculate how much money will leave your account over the next 30 days.

 

If that number scares you, good. Fear is a signal. Listen to it.

 

Then pick one item from this list that you're going to pay off early. Just one. Cut into your discretionary spending for the next two weeks and kill that payment. Feel what it's like to close out an arrangement completely.

 

Then do it again.

 

And again.

 

Until you're free.

 

Because that's what this is really about—freedom. Freedom from monthly payments. Freedom from late fees. Freedom from the constant background hum of financial anxiety. Freedom to make choices based on what you actually want, not what some algorithm has convinced you to buy.

 

The research shows how the system works. Now you know how to fight back.

 

Share this article with someone who needs to hear it. Then come back next week—we're going to talk about something even more dangerous than BNPL: the retirement crisis nobody's talking about.

 

About the Author: I write about the money, finance, tax, psychology of money and how to build wealth without losing your soul. Your financial future is worth fighting for.

 

References: Ashby, R. (2019). When Spending More Feels Like Less: The Influence of the Buy-Now-Pay-Later Payment Method on Consumer Spending Behaviour. Macquarie University.