Costco has announced a new partnership with Affirm, a leading “buy now, pay later” (BNPL) provider, giving members the option to split purchases, from groceries to large-ticket items, into monthly payments. While the move may offer greater flexibility for consumers, some experts warn it could signal deeper concerns about the state of the economy.
According to a recent shareholder letter cited by Bloomberg, eligible Costco customers can now finance purchases through Affirm's monthly payment plans. The deal makes Costco one of the latest major retailers to lean into BNPL services as inflation continues to pinch household budgets and credit card interest rates remain elevated.
Thorvardur de Shong
Affirm, along with Klarna and PayPal, has become a dominant player in the BNPL sector, a market projected to reach $160 billion within the next seven years. Klarna, in particular, has aggressively courted consumers with high-profile ambassadors like Snoop Dogg and Lady Gaga and recently signed a deal with OnePay, a Walmart-backed fintech.
While Affirm now counts Costco as a partner, the warehouse retail giant does not yet work with Klarna.
The rise of BNPL has expanded far beyond traditional retail. In March, DoorDash teamed up with Klarna to let customers finance food deliveries, subscriptions, and purchases from third-party retailers such as Best Buy and Home Depot.
“By offering smarter, more flexible payment solutions for groceries, takeout, and retail essentials, we’re making convenience even more accessible for millions of Americans,” said Klarna’s Chief Commercial Officer David Sykes at the time.
However, not everyone sees this as a positive development. Analysts warn that the growing reliance on BNPL for everyday necessities is a red flag.
Recent data backs up these concerns. The Federal Reserve Bank of New York reported that U.S. household debt reached $18.04 trillion in Q4 2024, a 0.5% increase. More troubling: credit card and auto loan delinquencies have hit a 14-year high.
During the 2024 holiday season, Adobe reported record-breaking BNPL usage, with over $18 billion in online spending, up 10% from the previous year. The trend is especially pronounced among younger consumers, who increasingly use these services to stretch limited budgets.
Retailers also benefit: According to RBC Capital Markets, BNPL boosts average order sizes by 30% to 50% and increases conversion rates.
However, with consumers increasingly relying on installment payments to afford essentials, experts caution that what seems like convenience may be masking deeper economic fragility.
