We've reported on many indications of a faltering US economy being propped up by debt, but our latest entry is particularly emphatic: DoorDash has inked a deal with Klarna that will let cash-strapped consumers pay for restaurant food, groceries and other delivery orders in four equal, interest-free installments, or "at a more convenient time, such as a date that aligns with their paycheck schedules." 

Buy Now, Pay Later (BNPL) arrangements have surged in recent years. However, what began as a reasonable accommodation for large purchases like appliances and furniture has now metastasized to a point where Americans can finance Friday-night-pizza impulse-buys.   

Klarna derives more than 60% of its revenue from fees paid by merchants who offer the financing option to their customers, with those fees potentially ranging from 1.5% to 7% of the purchase price. With some merchants, Klarna and other BNPL-facilitators also earn interest on long-term credit plans stretching out to upwards of 36 months. 

However, Klarna also has a chance to earn money from consumers who take the interest-free, four-equal-installments plan -- in the form of late fees of up to $7 per missed payment, up to 25% of the purchase price. For the financially disorganized or imminently insolvent, the interest-free option could prove to be a siren song that leaves their cash flow dashed against the metaphoric rocks of unexpectedly expensive burritos and Kung Pao chicken.  

Even for those who make timely payments, the interest-free option can have a destructive effect over time, by encouraging consumers to commit to spending more money than they would in the absence of the appealing, "interest-free" enticement. Indeed, that's one of the essential attractions for DoorDash and other merchants who choose to partner with the likes of Klarna:  

According to research from RBC Capital Markets...online BNPL offerings boosted average ticket sales by 30% to 50% and increase the share of customers who ultimately made a purchase. -- CNN

“The problem is these things start having a very pervasive and very negative influence on people who can’t afford it,” Anish Nagpal, an University of Melbourne marketing professor who studies behavioral decision-making, told the Washington Post. “They just want something now, and they go into this spiral of debt and always trying to chase up and meet the payment requirement.”

Naturally, Klarna Chief Commercial Officer David Sykes tried putting a different spin on things: 

“Our partnership with DoorDash marks an important milestone in Klarna’s expansion into everyday spending categories. By offering smarter, more flexible payment solutions for groceries, takeout, and retail essentials, we’re making convenience even more accessible for millions of Americans.”

We must ask: Is it ever "smarter" to finance a sandwich? 

News of the DealDash BNPL arrangement comes against a backdrop of steadily rising consumer debt and signs that Americans are increasingly unable to keep up with their obligations. The New York Fed's latest quarterly report found that total household debt increased by $93 billion in 2024's fourth quarter, pushing the total over $18 trillion. Warning lights are flashing:

After the Doordash-Klarna news broke, social media memesters had an absolute field day: