Buy Now, Pay Later” (BNPL) Makes Spending Feel Free—Until the Bill Arrives
Plus the direct pipeline from Crypto Prices to the Housing Market
Welcome back, as always each Monday I round up 2-3 academic studies discussing personal finance, and I provide analysis to see if these ideas are worth your time.
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#1—“Buy Now, Pay Later” (BNPL) Makes Spending Feel Free—Until the Bill Arrives
Does splitting purchases into four interest-free installments simply shift payment timing, or does it nudge people to buy more (and risk more debt)? Dionysius Ang and Stijn Maesen analyzed 275,000 customer records from a global fashion retailer that rolled out BNPL in 2023.
Methods & data
The authors used a staggered launch across markets as a quasi-natural experiment, comparing purchase behavior before and after BNPL became available. They linked transaction receipts to demographic data and credit-bureau scores to test which shoppers changed most as a result of BNPL.
Results
Adoption of BNPL boosted average order value by 10% and lifted overall reatuil revenue 6 % in the first six months.
Financially constrained shoppers (low credit limits, thin emergency savings) were 60 % more likely to choose BNPL and racked up higher cumulative balances.
Industry data show BNPL loans rising faster than credit-card balances during 2024’s holiday season.
Takeaways for your wallet
Treat BNPL like any other loan. Set a calendar reminder for each installment; late fees can exceed 25 % APR.
Use BNPL only for cash-flow smoothing, not bigger baskets. If you wouldn’t swipe a debit card for the item today, press pause.
Check your “phantom debt.” BNPL rarely shows up on traditional credit reports, so track it manually in your budget app.
#2— Why Tiny Mutual-Fund Fees Aren’t Actually Tiny
Do clearer fee disclosures lead investors to ditch overpriced investment funds? I am happy to say that, two research papers say yes.
Dollar-fee line item (SEC, 2004). Sitikantha Parida compared expense ratios five years before and after funds had to show the dollar cost of fees on a $1,000 investment in shareholder reports.
“Fee meter” graphics (SEC, 2024). SEC researchers ran randomized surveys with 4,400 adults to test whether a simple gauge that ranks a fund’s cost percentile spurs fee shopping.
An upcoming Review of Accounting Studies article finds that Morningstar’s simplified fact sheets amplify the effect in real trading flows.
Results
Average retail-share class fees fell 27 basis points (0.27 %) in the five years after the 2004 rule—savings that compound forever.
Without context, investors peg almost every expense ratio near the “middle of the pack.” The one-second fee-meter graphic tripled the share of participants willing to switch to a cheaper fund.
Investors who saw a fee meter doubled their estimates of what they estimated they would pay in lifetime investment fees, a classic “salience” effect: what we can see, we act on.
Takeaways for your wallet
Make fees visual. If your brokerage doesn’t show percentile rankings, paste the ticker into Morningstar’s free fee analyzer.
Benchmark against an index fund. For U.S. large-cap exposure, anything above ~0.10 % is suspect. For example, Vanguards S&P 500 Index ETF has an annual expense ratio of only 0.03%—which is as close to ‘free’ as you can get.
Remember investment fees compound the same way investment returns do. Paying an extra 0.50 % fee on $100k costs $500 the first year, ~ $6,300 over a decade at 7% returns.
3. Crypto Gains, Real-World Spending
When Bitcoin shoots up in value, do investors treat paper gains as real wealth? Aiello, Baker, Di Maggio and co-authors link bank and credit card data for millions of U.S. households to deposits at major crypto exchanges.
By mapping every dollar flowing into or out of Coinbase-style accounts, the authors impute daily crypto wealth and tie it to day-to-day cash, card, equity, and mortgage transactions. The NBER working-paper version of this research adds county-level Zillow data to gauge spillovers into housing markets.
Results
Households spend 9 cents of every $1 in crypto gains within a year—a marginal propensity to consume (MPC) twice as high as for unrealized stock gains. So people spend their crypto gains at twice the rate they spend stock market gains.
Roughly a third of that spending goes to down-payments and home renovations; counties with heavier crypto exposure saw house prices grow 0.43 percentage points faster after a big rally. This implies a very significant pipeline from crypto markets into the housing market
Crypto investors are more active (and overconfident) than the average retail stock investors, which plays a major role in amplifying boom-bust cycles.
Takeaways for your wallet
Treat crypto like any volatile asset. If a 30% draw-down would cancel next summer’s trip, you’re over-exposed.
Beware lifestyle creep. Spending only 9% of crypto gains sounds small until a $50,000 spike lands in your app. Decide today what slice of future wins goes to spending vs. long-term goals. The last thing you want is to get accustomed to a lifestyle you can only afford during a crypto-boom.
This weeks Wrap Up.
BNPL taps into our impulse-buy wiring—use it sparingly and track those “invisible” balances.
Fee salience saves money every year.
Speculative gains feel spendable. Channel crypto windfalls into durable wealth—mortgage principal, low-cost index funds, or an emergency buffer—before the market turns.
Tiny tweaks, big results. Across all three studies, the common thread is visibility: when the real price (or risk) is unmistakable, we make better decisions. Design your financial system so the signals stay front and center, and your future self will thank you.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
Interesting perspective. We’re seeing similar behavioral effects in emerging markets like Turkiye — especially among retail investors and credit-driven consumption. Great read!
Trouble ahead.