The convenience of “buy now, pay later” (BNPL) services is increasingly linked to poorer mental health, according to recent research. Adults reporting symptoms of depression, anxiety, or post-traumatic stress are significantly more likely to utilize these short-term loan options than those without such conditions, raising concerns about a potential cycle of financial strain and psychological distress.
The findings, stemming from an analysis of data collected by Dr. Catherine K. Ettman at the Johns Hopkins Bloomberg School of Public Health (JHSPH), highlight a concerning correlation. The study, based on the CLIMB survey, a long-running effort tracking stress and well-being among U.S. Adults, revealed a clear association between mental health symptoms and BNPL usage, even after accounting for demographic factors like age and income.
How BNPL Works and Why It’s Growing
BNPL services have rapidly gained popularity as an alternative to traditional credit, offering consumers the ability to split purchases into smaller, fixed installments, often without a traditional credit check. A federal report described these plans as an easy add-on at checkout, typically dividing a purchase into four payments over roughly six weeks. This accessibility, however, can be a double-edged sword.
The ease with which consumers can open multiple BNPL plans simultaneously can lead to “loan stacking,” obscuring the total amount of debt accumulated. Missed payments can trigger late fees or account cancellation, adding further financial pressure. The de Beaumont Foundation notes that this stress can easily spill over into other areas of a borrower’s financial life.
The Numbers: A Clear Correlation
The JHSPH study, encompassing 2,121 participants, found that 341 adults had used BNPL services in the preceding 12 months. After adjusting for demographic variables, the data showed that symptoms of depression were associated with a 1.91 times higher likelihood of BNPL use. Anxiety showed a 1.77 times higher odds, while probable post-traumatic stress demonstrated the strongest correlation, with 2.35 times higher odds. The study’s reliance on recent symptom reporting – within the past two weeks – limits definitive conclusions about the direction of the relationship, but the association is statistically significant.
The Psychological Factors at Play
Experts suggest that anxiety and depression can impair financial decision-making, leading individuals to prioritize immediate relief over long-term financial consequences. Stress hormones can narrow focus, making it difficult to consider the broader implications of spending choices. In moments of overwhelm, the perceived safety of a split payment can outweigh concerns about overall affordability, even when financial resources are already stretched thin.
The design of BNPL platforms also contributes to the issue. Retailers strategically position BNPL buttons alongside payment options, subtly encouraging impulse purchases. Research indicates that access to BNPL is linked to increased retail spending and a higher incidence of overdraft fees. Platforms leverage personal data to target offers at opportune moments, and the smaller payment amounts can obscure the true cost of a purchase.
A Vicious Cycle: Financial Strain and Mental Health
The relationship between financial difficulties and mental health is often cyclical. BNPL can exacerbate this cycle. A missed installment can result in fees and bank overdrafts, adding to financial strain and potentially worsening symptoms of anxiety and depression. Research has also shown a link between higher debt levels and a tendency to forgo essential healthcare, such as medical or dental care, further compounding stress.
While BNPL can sometimes offer a more affordable alternative to payday loans or high-interest credit cards, the potential for overspending and accumulating debt remains a significant concern.
The Need for Clarity and Further Research
The Payments Dive report highlighted the need for clearer terms and conditions for BNPL users, particularly when facing financial hardship. Dr. Ettman emphasized the importance of ensuring that these financial tools do not deepen existing financial difficulties. Clearer fee disclosures, transparent payment schedules, and timely reminders could help prevent short-term loans from escalating into larger problems.
The JHSPH study acknowledged limitations, including its cross-sectional design, which measured data at a single point in time and could not establish causality. The reliance on self-reported data also introduced the possibility of recall bias. Future research should focus on longitudinal studies that track individuals over time to determine whether BNPL use precedes mental health symptoms or vice versa.
Further investigation is also needed to assess the effectiveness of interventions such as clearer disclosures and limits on repeat borrowing in reducing late payments and mitigating stress. Without such research, policymakers will struggle to understand the true impact of BNPL on consumer well-being.
The study published in JAMA underscores the need for a more nuanced understanding of the relationship between financial products and mental health. As BNPL continues to proliferate, stronger disclosures and ongoing research are crucial to ensuring that convenience does not come at the expense of financial and psychological well-being.
