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Moral Panic over BNPL
Apr. 23rd, 2025 05:02 pmI saw a news article today about moral panic over BNPL. Apparently discussions have exploded on social media recently about people buying tickets for SXSW— the annual South by Southwest music/film/pop tech festival in Austin— using Buy Now, Pay Later (BNPL) services. The tenor of the discussions, which are really more like opposing rants, seems to be Kids These Days are being fooled into spending money they don't have on things they don't need vs. Old Fogeys who can't open their email without downloading at least 3 viruses. That prompted me to think, What is BNPL— and is it good or bad?
I've been vaguely aware of Buy Now, Pay Later schemes as a way of buying things online for a while now. I say vaguely because I know they're out there but I've never looked into them. And yes, lurking within my terminology is a value judgment. I've thought of them as them schemes because I've been suspicious from the start that they're come-ons that snooker uneducated customers into overpaying, in the form of high interest rates and service charges, on luxuries they maybe shouldn't be buying in the first place. But it's not just stuff like travel and pricey concert tickets; nowadays even DoorDash offers BNPL. If you can't afford a Chipotle burrito without financing it, maybe you shouldn't be eating out so much!
Okay, so what is BNPL? It's micro-credit. When you go to purchase something online, instead of charging it to a credit card, you can charge it on a BNPL plan. There are lots of fintech (financial technology) companies out there— many startups, but also bigger companies now— that offer these short-term loans and are integrated into various e-commerce sites. You go to checkout, you see the BNPL offers, and maybe you pick one of those instead of entering a credit card number. BNPL sets up a small loan specific to the thing you're buying. The merchant gets paid right away, your item ships right away, and you pay for it in installments.
See? Put that way, BNPL is not so foreign. It's kind of like a credit card. But it doesn't require opening a credit card in advance. This makes it accessible to the "under-banked": the socioeconomic group of people who find it hard to use banks or who are under-served or rejected by banks. The modern technology and interface for setting up BNPL works in a way that's way more familiar to younger generations. That helps explain the definite age gap in whether your reaction is "Wow, BNPL is great!" vs. "What's this new-fangled thing that's trying to steal my money?"
Okay, but is it stealing anyone's money? Part of my initial suspicion about BNPL was that it seemed to good to be true. Companies have to make their money somehow. How does BNPL earn money? In particular, are they like another credit provider for the under-banked— payday lenders, who charge outrageous interest rates and fees?
A bit of research shows that BNPL generally does not charge high interest rates. In fact it seems that a lot of offers extend short-term credit to buyers for free. For example, a customer purchasing a $1,000 plane ticket may be offered a plan to pay $250 now with another $250 due each of the next 3 months.
BNPL makes its money, as credit card companies do, by charging the merchants a fee. And, also like credit card companies, they make money by charging fees to the borrower if they miss any of their payments. If you're a few days late with one of those $250 installments, you may find all your remaining installments going up to $260— plus a $7 late fee.
A lot of the moral panic around BNPL is that it encourages people to overspend. I'll just point out, that's been a concern with credit cards for decades, too. I remember when I was a kid watching a family TV show in reruns, a well known older show that was in Black-and-White, where in one episode the teenage characters were getting themselves in all kinds of trouble because one of them had a new credit card and could not understand that he still had to pay for things, eventually. "Really, the moral of this TV show is 'People Are Too Stupid To Understand Credit Cards?'" I thought to myself. And I was a pre-teen then! The point is, what was a moral panic of 1960 seemed foolish by the 1980s. Similarly, much of today's hand-wringing about BNPL seems like people choosing to be frightened by a new technology they're unable or unwilling to understand.
But that said, it does seem wrong that you can finance a burrito on DoorDash.
I've been vaguely aware of Buy Now, Pay Later schemes as a way of buying things online for a while now. I say vaguely because I know they're out there but I've never looked into them. And yes, lurking within my terminology is a value judgment. I've thought of them as them schemes because I've been suspicious from the start that they're come-ons that snooker uneducated customers into overpaying, in the form of high interest rates and service charges, on luxuries they maybe shouldn't be buying in the first place. But it's not just stuff like travel and pricey concert tickets; nowadays even DoorDash offers BNPL. If you can't afford a Chipotle burrito without financing it, maybe you shouldn't be eating out so much!
Okay, so what is BNPL? It's micro-credit. When you go to purchase something online, instead of charging it to a credit card, you can charge it on a BNPL plan. There are lots of fintech (financial technology) companies out there— many startups, but also bigger companies now— that offer these short-term loans and are integrated into various e-commerce sites. You go to checkout, you see the BNPL offers, and maybe you pick one of those instead of entering a credit card number. BNPL sets up a small loan specific to the thing you're buying. The merchant gets paid right away, your item ships right away, and you pay for it in installments.
See? Put that way, BNPL is not so foreign. It's kind of like a credit card. But it doesn't require opening a credit card in advance. This makes it accessible to the "under-banked": the socioeconomic group of people who find it hard to use banks or who are under-served or rejected by banks. The modern technology and interface for setting up BNPL works in a way that's way more familiar to younger generations. That helps explain the definite age gap in whether your reaction is "Wow, BNPL is great!" vs. "What's this new-fangled thing that's trying to steal my money?"
Okay, but is it stealing anyone's money? Part of my initial suspicion about BNPL was that it seemed to good to be true. Companies have to make their money somehow. How does BNPL earn money? In particular, are they like another credit provider for the under-banked— payday lenders, who charge outrageous interest rates and fees?
A bit of research shows that BNPL generally does not charge high interest rates. In fact it seems that a lot of offers extend short-term credit to buyers for free. For example, a customer purchasing a $1,000 plane ticket may be offered a plan to pay $250 now with another $250 due each of the next 3 months.
BNPL makes its money, as credit card companies do, by charging the merchants a fee. And, also like credit card companies, they make money by charging fees to the borrower if they miss any of their payments. If you're a few days late with one of those $250 installments, you may find all your remaining installments going up to $260— plus a $7 late fee.
A lot of the moral panic around BNPL is that it encourages people to overspend. I'll just point out, that's been a concern with credit cards for decades, too. I remember when I was a kid watching a family TV show in reruns, a well known older show that was in Black-and-White, where in one episode the teenage characters were getting themselves in all kinds of trouble because one of them had a new credit card and could not understand that he still had to pay for things, eventually. "Really, the moral of this TV show is 'People Are Too Stupid To Understand Credit Cards?'" I thought to myself. And I was a pre-teen then! The point is, what was a moral panic of 1960 seemed foolish by the 1980s. Similarly, much of today's hand-wringing about BNPL seems like people choosing to be frightened by a new technology they're unable or unwilling to understand.
But that said, it does seem wrong that you can finance a burrito on DoorDash.
The card is the Hilton Honors American Express Aspire. And it's not technically a card I've opened; it's a card I upgraded to from my present card. Plus, it's a level of card I have experience with. 
This card pays a not-generous 5x points/dollar on IHG hotel spend; 2x on restaurant, gas, and grocery spend; and 1x on everything else. At a value of 0.6 cents per point* that's only 3% value on hotels and less than 2% on everything else. I already own 
Reaching A+ requires earning 70,000 Tier Qualifying Points (TQPs) in a year. These come primarily from flying and are revenue based. (I.e., the more a ticket costs, the more points you earn. Points are not distance-based like in other airlines' programs in years past.) There are also bonuses for certain credit card activity. I managed my cards and charges adroitly to earn over 15k TQPs through them. Then there are occasionally flight bonuses, like double/triple TQPs for flights booked and flown within certain date ranges. I rebooked one of my flights from using points to spending cash to hit this year's bonus in the fall.
The sign-up offer was a bonus of 75,000 American Airlines AAdvantage points for spending $6,000 in 6 months. I hit that target in 3 months then tossed the card in a desk drawer for the next 10 months.
The way I choose to open and close credit cards is never seat-of-the-pants, like "Oh, this fee just posted, I'll close it." I'm very deliberate. So let's review the math on this one.
Companion Pass (CP) requires a steep 135,000 qualifying points. There are a number of ways to earn these CPQPs: from flights on Southwest, from spending with partners such as rental car agencies, from spending on Southwest's affiliated credit cards, and from sign-up bonuses on credit cards. Reaching 135k solely on flying is pretty tough. I've done 2 or 3 times in the past 10 years. Most of the time I've made it with the help of some credit card action. This year I got a big boost, 60k CPQPs, from meeting the sign-up bonus on 
The Citibank DoubleCash card is the oldest in my credit card portfolio. I've had it, and the the predecessor I converted it from, for over 10 years now. Citi DC, as I call it for short, comes with a fairly simple proposition: it pays 1% on purchases charged plus another 1% on balances are paid. The dividend earned can be taken in the form of a bank transfer or applied as a statement to help pay off the balance. Though if you choose the latter method you loose out on the second 1% of that amount, so it nets out as 1.98%.
At the time it offered slightly better redemption terms; Fidelity would auto-deposit cashback to my Fidelity account every time the cashback balance passed $25. Citi made me wait 'til $50 for a check. Citi's now better with no minimum for a transfer, but I continue to use the Fidelity card way more because the auto-deposit to my Fidelity account is so convenient. That's a big part of why I've cycled over $22,000 of charges through it in the past 12 months, versus less than $500 on the Citi DC.
The new card I opened is the Chase Southwest Rapid Rewards Business Premier card. Yes, that's a mouthful. It always is with these cards. 🤣
I opened this card account 13 months ago with a lucrative sign-up bonus. All I had to do was pay the $99 annual fee and make one charge in the first 3 months to earn a whopping 70,000 American Airlines miles. Nevermind that I already had 
Airline Credits, Hilton Credits, and More
Marriott continued being my #1 hotel chain in 2023, at least in terms of nights stayed. I stayed 21 nights with them. The count rises to 23 if we include nights Hawk paid for with points or certs from her account. Of course, these numbers are way down from the 60, 70, or more nights per year I logged with Marriott in my business travel heyday years ago.
Hilton remained my #2 hotel chain in 2023 with 16 nights stayed. The majority, 9 nights, were actually paid. The other seven were on points and free-night certificates— 
Intercontinental Hotels Group (IHG), whose portfolio includes Holiday Inn and Holiday Inn Express, remained my #2 hotel chain for 2023. For most of the year it was set to overtake Hilton, but a spree of nights late in the year put Hilton ahead. I logged 8 nights with IHG on my membership plus another 8 on Hawk's.
I'll start with the newer of my two cards, the IHG Rewards Premier Business card from Chase. I opened this account with a bonus offer of 140,000 points after $3,000 spend in 3 months. It took me only 2 months to cinch the offer. I went on to charge about $7,700 over the course of 12 months. I earned about 180,000 points total.
