The No. 1 Way To Avoid This Marketing Trap That Leads to Debt, According to Rachel Cruze

Rachel Cruze is all about helping people avoid money traps. As the daughter of finance personality Dave Ramsey, she learned the importance of questioning financial hype at a young age.

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Now a certified financial coach, speaker, author and internet money personality in her own right, Cruze built her brand with a no-nonsense style and a talent for financial myth-busting. In a video posted to her YouTube channel, she specifically calls out a popular yet financially hazardous marketing trend: “buy now, pay later,” or BNPL

Keep reading for a closer look at why Cruze cautions against using this trendy payment method.

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What Is BNPL?

BNPL is a retail payment option that splits transactions into a set number of equal installments. Installments are interest free, which accounts for much of BNPL’s appeal. However, Cruze warned this messaging is a “marketing trap that almost always evolves into debt.”

The Growing BNPL Problem

According to the Consumer Financial Protection Bureau (CFPB), BNPL consumer debt increased by almost 1,100% between 2019 and 2021. The number of approvals and the percentage of late payments also increased significantly.

Making Overspending Easier

Consumers jump on BNPL because they see it as harmless, but as Cruze warned her viewers, “It’s all a trap to get you to spend more money.”

BNPL lenders even use this overspending to market themselves to retailers, pointing out that paying later leads shoppers to spend up to 85% more.

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Encouraging Dangerous Spending Habits

In March 2024, NBC News shared the stories of consumers who fell prey to BNPL promotions. Some spent thousands over several years, and a few have multiple outstanding balances. One woman owed more than $9,000 on luxury retail purchases.

These consumers found that BNPL lenders kept asking them to spend more, even as they paid off their balances.

“I finally paid my Afterpay bill, and they immediately emailed me to purchase shoes on an installment plan,” NBC quoted a Reddit user as saying.

Incurring Hidden Penalties

BNPL plans may market themselves as interest free, but missed payments can result in hefty late fees. In 2021, the last year of CFPB data, over 10% of shoppers owed late fees.

The Fine Print: Cruze’s Consumer Warnings

Cruze explained to her viewers that although BNPL seems safe, it’s actually incredibly risky for a number of reasons.

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BNPL Is Real Debt

“Just because there’s no official paperwork doesn’t mean it’s harmless,” said Cruze.

Even though you may not have to complete a lengthy application, BNPL is still debt, meaning there are consequences for missed payments. Those consequences might not be clear on the initial application.

The CFPB warns consumers that BNPL suffers from a “lack of clear disclosures on loan terms,” largely because credit disclosure rules usually don’t apply. You won’t see the cost-of-credit statements you’d find on traditional credit cards — but you still owe that money.

This lack of clarity makes consumers see BNPL as safer than it is. And retailers and lenders benefit as consumers keep spending.

You Can’t Afford It If You Can’t Pay Now

One of Cruze’s main goals is helping people get out of debt. She believes in the foundational rule that you can only afford something if you can pay cash for it today.

Cruze emphasizes this point to consumers who might find BNPL tempting. Knowing that people will spend more when they delay payments, she challenges viewers to buy only if they have the money in their bank accounts.

If you have the money, then you don’t need to “pay later.”

Paying Later Is Discouraging

Cruze knows BNPL involves emotional temptations, so she shares one of the biggest emotional downsides: paying for something you’ve already used.

“Think about food you’ve already eaten or a movie you’ve already seen,” said Cruze. With BNPL, “you’re still paying for it.”

Instant gratification turns into delayed responsibility without the consolation prize of a shiny new purchase.

The No. 1 Way To Avoid BNPL

Cruze’s number one tip for avoiding the BNPL trap is her tip for many other money challenges: Stick to a budget.

A budget is Cruze’s foundational tool for money management because it offers users the freedom to spend responsibly. Instead of worrying about every purchase and whether you can afford it, you can confidently spend what you’ve allocated for each specific category.

“It’s way more enjoyable to live your life like that,” Cruze added.

She explained that a budget shows you how much you have to spend in any category. Because you’ve planned for that spending and know they money is in your bank account, you don’t need to spread payments across multiple months. It’s easy to avoid the temptation to pay later, when you’re free to do the first part of the equation: Buy now.

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