Buy Now Pay Later vs Buy XEQT Now: How BNPL Is Costing Canadians Their Retirement

A few months ago, I was buying a pair of running shoes online. Nothing fancy – a $180 pair of Brooks that I had been wearing down for over a year and genuinely needed to replace. Standard checkout. Enter your credit card. Click “place order.” Except that is not what the checkout page looked like anymore.

Between the cart total and the payment button, there were four different options I had never asked for. Afterpay: four payments of $45. Klarna: pay in 30 days, interest-free. Affirm: split into monthly installments. PayBright: flexible financing.

Four separate companies, all competing to convince me that $180 was too much to pay at once for shoes I could easily afford.

I did not use any of them. But I noticed something. My brain hesitated. For just a second, $45 sounded better than $180, even though it was the same money. That tiny psychological pull – that split-second where my brain preferred the smaller number – is exactly what these companies are counting on. And it is costing an entire generation of Canadians a fortune.

Then I talked to a friend – let’s call him Matt – who told me, almost proudly, that he “never pays full price upfront anymore.” He had active installment plans on a jacket, a gaming monitor, sneakers, a coffee machine, and concert tickets. Five simultaneous BNPL plans totalling over $1,200 in committed future payments. He was not broke. He had a decent salary. He just never bought anything outright anymore. It was his default.

When I asked Matt if he was investing anything, he shrugged. “Not really. I keep meaning to start.”

Matt is not unusual. He is the norm. And this post is about the enormous gap between where Matt’s money is going and where it could be going instead – into something like XEQT that would actually grow over time, instead of being sliced into installment payments for things that lose value the moment you open the box.

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1. What Is Buy Now Pay Later, and How Does It Work in Canada?

Buy Now Pay Later (BNPL) is exactly what it sounds like. You buy something today and split the cost into smaller payments over weeks or months. The pitch is simple: no interest, no credit check, instant approval, no catch.

The most popular BNPL services in Canada include Afterpay (four payments over six weeks), Klarna (pay in 4 or defer 30 days), Affirm/PayBright (installment plans from 3 to 36 months), and Sezzle (four interest-free payments). They are embedded in the checkout flow at nearly every major Canadian retailer.

Here is how it works. You are buying a $400 jacket. Instead of paying $400 today, you select the BNPL option at checkout. You pay $100 now, $100 in two weeks, $100 in four weeks, and $100 in six weeks. No interest – as long as you make every payment on time.

Sounds harmless, right? That is precisely the problem. The BNPL model is designed to feel like a favour, but what it is actually doing is removing the friction between you and a purchase you might not have made if you had to pay the full price at once. That distinction – between what you would buy at full price versus what you will buy at a quarter of the price – is where the real cost hides.

2. The BNPL Explosion in Canada: How Big Is This?

Buy Now Pay Later is not a niche trend. It is a massive and rapidly growing financial behaviour, especially among younger Canadians.

Here are some numbers that should get your attention:

• Nearly 40% of Canadian millennials and Gen Z consumers have used a BNPL service at least once, according to Payments Canada data
• The Canadian BNPL market has been growing at roughly 30-40% year over year since 2021
• A 2024 survey by the Financial Consumer Agency of Canada found that one in four Canadians aged 18-34 had an active BNPL plan
• The average BNPL user in Canada carries 2-3 active installment plans at any given time
• Total BNPL transaction volume in Canada is estimated to exceed $10 billion annually and climbing
• Global BNPL transaction value is projected to surpass $500 billion USD by 2028

You used to finance a car or a house. Now you finance a $60 skincare set. BNPL has been embedded into the checkout flow at Hudson’s Bay, Best Buy, Sephora, Lululemon, and hundreds more Canadian retailers.

BNPL companies make money two ways: they charge the retailer a fee (typically 3-6% of the transaction), and they charge you late fees and interest if you miss a payment. The “interest-free” model only works if you are perfect. Statistically, a significant portion of users are not.

3. The Psychology of Why BNPL Works So Well

This is the part that genuinely fascinates me, because BNPL is not just a payment method. It is a masterclass in behavioural psychology, and understanding why it works is the first step to breaking free from it.

The pain of paying

Neuroscience research from MIT and Carnegie Mellon has shown that paying for something activates the same brain regions associated with physical pain. When you hand over $400 for a jacket, your brain registers a loss. That pain is a natural brake on spending – it makes you pause and ask whether the purchase is worth it.

BNPL disarms that brake. Paying $100 triggers roughly one-quarter of the pain signal. Your brain evaluates the purchase against $100, not $400, even though the total cost is identical. The pain of paying is directly proportional to the amount you see leaving your account at the moment of purchase, not the total you will eventually pay.

Present bias and hyperbolic discounting

Humans are hardwired to overvalue the present and undervalue the future. Psychologists call this present bias. A $400 payment today feels enormous. Four $100 payments spread over the next six weeks feel manageable. Your brain treats future payments as less real than present ones, even though future-you is going to feel every single one of them.

This is the same cognitive bias that makes it hard to save for retirement. The future version of you who needs that money feels abstract and distant. The present version of you who wants new headphones feels very, very real.

The spending multiplier effect

Here is the finding that should alarm you: BNPL users spend 20-40% more per transaction compared to what they would spend paying upfront. This has been documented across multiple studies and is openly acknowledged by BNPL companies themselves – it is their core sales pitch to retailers. “Integrate our payment option and your average order value goes up.”

You are not just splitting the same purchase into four payments. You are buying more expensive items, adding extra items to your cart, and shopping more frequently because the per-payment cost always looks small.

The subscription-ification of everything

BNPL trains your brain to think of every purchase as a small recurring payment rather than a one-time cost. That $25/week for a jacket does not feel like buying a jacket – it feels like a subscription. And we have already been conditioned by Netflix, Spotify, and gym memberships to accept small recurring payments without question. BNPL plugs directly into that conditioning.

If you have not already done one, this is a perfect time to do a full subscription audit – the combination of subscriptions and BNPL payments can quietly consume a shocking portion of your income.

4. The Hidden Costs of BNPL That Nobody Talks About

“But it is interest-free,” you say. “What is the catch?”

There are several, and they add up to far more than most people realize.

Late fees that hit fast and hard

Miss a payment by even one day and most BNPL providers charge late fees of $5-$15 per missed payment. Some cap total late fees per purchase, but when you are juggling three or four active plans simultaneously, those fees compound. A 2024 Consumer Financial Protection Bureau study in the US found that nearly 20% of BNPL users had been charged at least one late fee. Canadian numbers are similar.

Credit score impacts

BNPL used to fly under the credit bureau radar. That is changing. Equifax and TransUnion are increasingly incorporating BNPL data into credit reports in Canada. Multiple active plans – especially with missed payments – can now lower your credit score, which means higher interest rates on your mortgage, car loan, and credit cards. The “free” financing on a $200 purchase could cost you thousands in higher mortgage interest.

The debt stacking trap

You have a BNPL plan on a jacket. Before it is paid off, you start another on headphones. Then shoes. Then a coffee machine. Each payment seems manageable – $30 here, $25 there. But suddenly you have $300-$500 per month in BNPL obligations that feel like fixed expenses.

This is debt stacking – layering multiple small debts until the total becomes genuinely burdensome. Because each individual plan seems small, you never get the alarm bell that a $1,500 credit card balance would trigger. BNPL has created a form of debt that does not feel like debt.

Spending more than you intended

This is the biggest hidden cost, and it is not a fee at all. It is the gap between what you would have spent without BNPL and what you actually spend with it. If BNPL causes you to spend even 25% more than you otherwise would – and the research suggests it is at least that much – then a person spending $300/month on BNPL purchases is spending roughly $75/month more than they need to.

That is $900 per year in unplanned spending. Over a decade, at an 8% compound growth rate, that $900/year represents over $13,000 in lost investment growth. And that is just the excess spending – it does not include the opportunity cost of the base purchases themselves.

5. The Opportunity Cost: What Your BNPL Spending Would Be Worth in XEQT

This is where the math gets uncomfortable. And I mean that in the best possible way, because uncomfortable math is what changes behaviour.

The average active BNPL user in Canada spends $200-$400 per month through installment plans. Now imagine redirecting that spending into XEQT – a single ETF holding over 9,000 stocks across 49 countries, with a 0.20% fee and a historical return of approximately 8% annually.

Here is what happens at different monthly amounts:

Read that last row. A 25-year-old who stops spending $400/month on BNPL purchases and invests it in XEQT instead retires at 55 with nearly $600,000. For many Canadians, that is the difference between a comfortable retirement and a stressful one.

And here is the kicker: the stuff you bought with BNPL – the jackets, the headphones, the gaming monitors, the sneakers – will be worth approximately zero dollars in 30 years. Most of it will be in a landfill. Your XEQT portfolio, on the other hand, will still be there, still compounding, still growing.

The opportunity cost of spending is always real. But BNPL makes it worse because it encourages you to spend more than you otherwise would, on things you might not have bought at full price.

6. The Cultural Shift: We Normalized Debt and Forgot About Investing

There is something bigger happening here. We are witnessing a cultural shift where financing everyday purchases has become completely normal, while investing remains something people “will get around to eventually.”

BNPL marketing is everywhere – cheerful, aspirational, frictionless. “Treat yourself.” “Get it now.” “Pay later, stress-free.” Meanwhile, investing is marketed with complicated charts, intimidating jargon, and warnings about risk. No wonder a 26-year-old who sees “pay in 4 easy installments” feels more comfortable than one who sees “invest in a globally diversified equity ETF.”

The irony is brutal. BNPL is marketed as empowering, but it keeps you on a treadmill of consumption. Investing is marketed as intimidating, but it is the thing that actually sets you free.

My friend Matt is a perfect example. He sees himself as financially savvy because he “never pays interest” on his BNPL plans. He tracks his payment schedules in a spreadsheet. If he put half that effort into setting up a $300/month automatic XEQT purchase, he would be on track to have over $440,000 in 30 years. Instead, he has a closet full of financed purchases and zero invested.

This is not Matt’s fault. The BNPL option is right there at checkout, requiring zero effort. Investing requires opening an account, learning what an ETF is, and making a decision that feels scary. One path is designed to be frictionless. The other is full of friction.

The solution is making investing as easy as BNPL – and that is exactly why I recommend automating your XEQT purchases. Once you set it up, it runs on autopilot. Same frictionless experience, but in the direction that builds wealth instead of draining it.

7. The Side-by-Side Comparison: Two Paths for the Same Dollar

Let’s make this concrete. Imagine two 25-year-olds – Priya and Jordan. Same income, same expenses, same $300/month in discretionary spending.

Priya uses BNPL for most of her discretionary purchases. She always has 2-3 active installment plans, spends $300/month through Afterpay, Klarna, and Affirm, and has not started investing yet.

Jordan used to do the same thing, but decided to change course. She redirected $300/month into automatic XEQT purchases in her TFSA. She still buys things she wants – she just pays outright and only for things she can comfortably afford.

Here is where they stand over time:

By age 55, Priya has spent $108,000 on consumer goods that are now worthless. Jordan has $443,261 in her TFSA – completely tax-free. That is not a subtle difference. It is the gap between financial freedom and financial stress.

Jordan is not living a spartan life. She barely notices the difference in her daily spending. She will absolutely notice the difference at retirement.

8. Breaking the BNPL Habit: A Practical Playbook

If you recognize yourself in Priya’s story, do not feel bad about it. BNPL is engineered to be appealing, and the companies behind it spend millions making sure you use their service. The fact that it works on you is not a character flaw – it is a sign that their product design team is good at their job.

But you can break the cycle. Here is how.

Step 1: Audit your current BNPL commitments

Open every BNPL app you have used. Write down every active plan, the remaining balance, and the payment schedule. Add up the total monthly obligation. Most people are genuinely surprised by this number.

Step 2: Finish current plans without starting new ones

Pay off existing plans on schedule, but commit to not opening new ones. Remove the apps from your phone. If the BNPL option is not in front of you at checkout, the temptation disappears.

Step 3: Apply the 48-hour rule

For any discretionary purchase over $50, wait 48 hours before buying. The majority of impulse purchases feel far less urgent after two days. BNPL thrives on immediacy – introduce a delay and you break its power.

Step 4: Calculate the XEQT value of every purchase

A $200 purchase invested at 8% for 20 years becomes roughly $932. Is the item worth $932 to you? Sometimes it genuinely is. But asking the question forces intentional decision-making. For a deeper dive, check out the opportunity cost guide.

Step 5: Automate XEQT investments equal to your old BNPL spending

Redirect the exact amount you were spending on BNPL into automatic XEQT purchases in your TFSA or RRSP. The key word is automatic. BNPL works because it is effortless. Your investment needs to be equally effortless.

Step 6: Track your progress

Watch your portfolio grow. When you hit $1,000, $5,000, $10,000 – those milestones feel far more satisfying than any financed purchase ever did.

9. This Is Not About Deprivation – It Is About Direction

I am not telling you to never buy anything nice. I buy things. I enjoy things. Last month I bought a nice backpack for a hiking trip and did not feel a shred of guilt, because I paid for it outright after my automatic XEQT purchase had already been deducted for the month.

The problem with BNPL is not that you are buying things. It is that BNPL changes the volume and frequency of your buying. It removes the natural friction that helps you distinguish between things you genuinely want and things you are buying because the payment looks small. It normalizes perpetual low-grade consumer debt. This is the same principle behind lifestyle creep – your spending expands to fill the space available, except BNPL creates artificial space by making everything look affordable.

The fix is not deprivation. It is direction. Point your money at your future first, then spend what remains on things you genuinely value. If you can afford to buy something outright after your investments are funded, buy it and enjoy it completely. No guilt, no spreadsheet, no second-guessing.

People who invest first and spend second actually enjoy their purchases more, because they never feel the creeping anxiety of overextended installment plans or the nagging sense that they are living beyond their means.

10. The Bottom Line: Buy XEQT Now, Not Stuff Later

The BNPL industry has built a $10-billion machine designed to make you comfortable with one idea: you can have it now and figure out the money later. But “later” is exactly when the money matters most. Every BNPL checkout is a fork in the road: one path leads to a depreciating consumer good, and the other leads to long-term wealth.

You do not need to quit BNPL cold turkey tomorrow. But start paying attention. Notice the psychological pull of the smaller number. And ask yourself: is this purchase worth more to me than what this money could become?

Sometimes the answer will be yes. That is perfectly fine. But for the purchases where the answer is “honestly, not really” – and there will be many – redirect that money into XEQT. Set it up once, automate it, and let compound interest do what it has always done: turn consistent, boring, automatic investments into life-changing wealth.

The BNPL companies want you to buy now and pay later. I am suggesting something different: invest now and live better later. The math is overwhelmingly on your side.

Related Reading

• What Is XEQT? The Complete Beginner’s Guide
• The Real Cost of Every Purchase: Opportunity Cost vs XEQT
• The Subscription Audit: Find Hidden Money to Invest in XEQT
• Lifestyle Creep: How to Invest Your Raises Instead of Spending Them
• The Cost of Waiting to Invest in XEQT
• The Power of Compound Interest With XEQT