Author: Christy Bieber

Faced with the rising cost of living, many American retirees are looking to control one of the most fundamental expenses: housing.

Since the pandemic, the cost of housing has remained stubbornly high. According to a recent report, home affordability slipped further in January, as rising prices raised the income needed for a mortgage in 12 of 13 major markets.

Moving is not easy at the best of times, but for retirees, deciding whether to rent or own their home will have a long-term impact on their finances and their lifestyle. To help clarify whether renting or owning is your best option, retirement author and YouTube host Geoff Schmidt advises following what he calls the 5x5x5 rule.

About the 5x5x5 formula

The 5x5x5 rule is a way to gain clarity on your decision to move by breaking down the pros and cons of renting versus owning both short- and long-term. Most importantly, retirees need to consider where they’ll be — not just geographically speaking — 10 years down the road. Here’s a breakdown of each of ‘five’ in the 5x5x5 rule.

5 pros of ownership

The first step in deciding if you want to buy a new home as a retiree is to think about the five big perks of having your own property. For retirees, the pros of owning a home allow you to:

1. Build equity in your home: Each mortgage payment you make brings you closer to owning your house free and clear with no payments. If you can buy a new home or condo outright by selling your current home, you can still build equity in your new dwelling over time.
2. Predictability: If you have a fixed-rate mortgage, your mortgage payments will remain consistent for years and you don’t have to worry about a landlord ever making you move.
3. Tax benefits: While mortgage interest and property taxes are not tax-deductible on a principle residence, you could find tax deductions if you use a portion of your home for a home-based business or to rent out as short-term accommodation or to a long-term tenant.
4. Customization: You don’t need a landlord’s permission to alter and improve your home.
5. Home appreciation: Homes generally increase in value, so you can increase your net worth by owning a property.

5 pros of renting

Renting also has five significant upsides, particularly for retirees who want greater freedom to travel and to make bigger moves — potentially across the country or even abroad. These include:

1. Extreme flexibility: You can leave your property after giving notice and go wherever you want much more easily than with an illiquid home you’d have to sell first.
2. Lower upfront costs: You only have to pay first and last month’s rent and a security deposit to move into a rental, not make a large home down payment.
3. No maintenance concerns: If something breaks, your landlord is responsible for the cost of fixing it and the actual repairs. You don’t have to build up an emergency fund for maintenance.
4. Predictable expenses: For the duration of your lease, your monthly housing costs including utilities will remain consistent, even if the cost of energy goes up, for example.
5. Lack of worry: If you’re in a rental apartment, you won’t have to concern yourself with shovelling snow, mowing grass or other matters of general, external upkeep.

5 variables that help you make the decision whether to rent or buy

The last step in the 5x5x5 rule is to consider specific variables that affect you. These include:

• Financial stability: Considering your current and future Canada Pension Plan (CPP) benefits and retirement income, will renting be more affordable long term, or will owning be more beneficial?
• Lifestyle preferences: Think about quality of life and what matters to you. Maybe your biggest priority is to be close to family. Perhaps you want easy access to amenities like health care and recreation. Do you want more predictability or more flexibility? Which option — buying or renting — comes closest to matching your desires?
• Current and future health: Are you in a position to maintain your home and does it have aging-in-place options?
• Estate planning: Do you want to have a home to leave as an asset to your loved ones?
• Market conditions: Is it a good time to buy a property? What do you think will be happening in the real estate market in the next decade?

By asking yourself these detailed questions about your own personal financial goals and lifestyle preferences, it will be easier to decide whether to own or rent now and in the long term.

@plaacement()

This article Should Canadian retirees own or rent their home? Use this simple ‘5x5x5 rule’ to figure it out originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

For many Americans, retirement means freedom: The flexibility to hit the links whenever the sun shines, or even to take a road trip to visit parts of the country you’ve never seen or far-flung family members.

But once you retire and start living off a fixed income, slowly drawing down your savings, you need to be careful about how you spend your money — especially if you’re still carrying a mortgage.

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Of course, you’re far from alone in this. Data from the Federal Reserve revealed 64.8% of households ages 65 to 74 carried debt in 2022, which is a significant increase from the 49.7% of older households in debt in 1989. Average debt also surged from $10,150 per household ages 65 to 74, up to $45,000 between 1992 and 2022.

If you’re just carrying mortgage debt, you’re doing pretty well for your demographic. However, unexpected expensive purchases can take a toll on your budget. Say you’ve been retired for two years since you packed it in at 65 and all those road trips to visit family have taken a toll on your current vehicle. It’s time to replace it. You’re willing to opt for used, but you’re still feeling a bit of sticker shock at what it costs to buy even secondhand these days.

If you’re now trying to decide if you should borrow for a car, though, you should be aware that you’ll be joining the ranks of retirees with non-mortgage debt. And you’re right to be nervous about doing that, as committing to making monthly payments while you’re on a fixed income can be tough since you’ll have less money to spend going forward once you do that.

If you need transportation, you may feel like you have no choice, though — but before you move forward, there are a few things to think about first.

How to decide if you can afford a vehicle on a fixed income

The first thing you’re going to need to do is to make sure that your vehicle will be 100% affordable if you borrow for it. You do not want to increase your retirement account withdrawal rate above a safe withdrawal rate, which Morningstar analysts now agree is 3.7%, although it used to be 4%.

If you can afford car payments while sticking to a safe withdrawal rate, either because you have wiggle room in your budget already or because you can cut back on non-essentials, then you can go forward with borrowing if you must.

You also can’t forget about the costs of maintenance and insurance, though, which you’ll want to ensure you can afford on your budget before moving forward. You can get insurance quotes before you buy to estimate these expenses.

Make sure you don’t borrow too much

If you do the math and the car payments, maintenance, and insurance costs seem reasonable, there are still a few caveats to consider.

First, experts recommend you aim to make a down payment of at least 10% if you’re buying a used car and 20% if you’re buying new. This will help you avoid ending up “underwater” or owing more than the car is worth.

If you don’t put money down, the car can depreciate or decline in value faster than your loan balance, and this creates big problems because you can’t easily sell the car or refinance if you need to. You would need to bring cash to the table to pay off your loan.

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You also want to avoid taking a very long car loan, as this makes your debt payments last longer and increases your total interest costs, and you’ll want to make sure you understand the terms of your loan, including the total costs over time.

Experian reports the average monthly auto loan payment in the last quarter of 2024 was $742.

Further, the typical loan term for has risen to 67.98 months. Being in debt for nearly six years for a vehicle is a long time when you’re 67, especially if your payments are anywhere near this high.

To avoid committing your older self to such a big payment, which could become less affordable as you begin to incur more expenses due to the effects of aging, aim to limit your loan to the shortest term possible and the lowest amount possible — even if that means your car isn’t the fanciest.

Alternatives to a car loan in your 60s and 70s

If you find that a car loan is simply too expensive, or if you’re still concerned about how it will impact your finances, you should consider alternatives before moving forward with borrowing.

Looking for a cheap used car you can pay cash for could be your best option — but remember, don’t take too much out of your retirement accounts and drain your balance. Instead, work on saving over time from your regular monthly income.

Leasing a car could come with cheaper monthly payments, but keep in mind you’re essentially renting a car and won’t end up owning it, and you’re restricted in how much you can drive the car and what changes you can make. You could also get stuck either paying a lot to buy the car at the end of the lease, or leasing for the rest of your life and having ongoing payments forever.

If you can’t pay cash for a car or find an affordable one within your budget, then buying a car simply may not be in the cards. Many older adults get discounts on public transportation, and some communities help them out with low-cost or no-cost rides to stores and medical appointments. While going without a car may seem like a pain, it’s a lot better than going without other necessities like food or medicine.

If you do decide to buy, be sure to shop for a car loan before you go to the dealer to see if you can get better rates and terms. Focus on affordability by taking the entire cost into account, not just the monthly payment, and don’t take out a long loan or a loan you don’t fully understand, or you could end up with serious regrets.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

The Trump administration is aggressively focused on cutting costs and reducing the size of government. To that end, President Donald Trump signed an executive order in February, aimed at reducing the federal bureaucracy.

Agency heads responded to the executive order, and, in conjunction with efforts by the Department of Government Efficiency (DOGE), more than 50,000 federal workers have been laid off from their positions.

Many of these firings have been challenged in court, with several judges issuing injunctions on the firings and ordering workers to be reinstated or placed on administrative leave. However, the Trump administration is appealing these orders, and there is a very real possibility that they will ultimately be able to follow through on their workforce reduction efforts.

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If the federal workforce does end up being substantially reduced, obviously it will profoundly affect the finances of government workers. However, every American could also find their finances affected by such a move.

Here’s how your finances — including your retirement and taxes — could be affected.

Getting help with Social Security benefits could be harder

The Social Security Administration (SSA) is one of the agencies that expects to reduce its workforce, indicating that it’s planning to cut as many as 7,000 jobs. The agency has also operated with a regional structure of 10 offices, which will be reduced to four.

NPR reports that one source at the SSA believes this will have dire consequences because people who need help with claiming retirement or disability benefits will not get the support they need.

"The public is going to suffer terribly as a result of this," the source wrote.

"Local field offices will close, hold times will increase and people will be sicker, hungry or die when checks don’t arrive or a disability hearing is delayed just one month too late."

While the Trump administration has pledged not to cut Social Security benefits, new plans to require in-person verification of identity have also raised concerns that not everyone will be able to access the benefits they need. The plans were partially walked back amid outcry from advocacy groups over concerns that seniors with disabilities might face challenges in accessing benefits.

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It may be more difficult to get tax help

The IRS is also on the chopping black. Around 7,000 probationary workers were laid off in February, although those workers have been reinstated, per court orders, and placed on administrative leave. The IRS is reported to be preparing for a 50% cut to its workforce, reducing it from 100,000 to around 50,000, by way of buyouts, attrition and layoffs.

While workers who are considered "critical" to processing tax returns have been prevented from accepting buyouts until after the tax filing deadline, downsizing the IRS could make it more difficult for people to get help with tax issues over the long-run.

Experts told Kiplinger that it is becoming more difficult to get someone to answer the phone at the IRS, and that high-value collections cases are no longer being handled properly because the revenue officers that were working on the cases have been fired.

Low staffing levels at the IRS could also result in returns and refunds being processed more slowly, taxes going uncollected and more people facing tax penalties because they can’t get their questions answered by knowledgeable staff members.

Consumers could become more vulnerable to financial fraud and abuse

Finally, the Trump administration has been very aggressive in making moves to shutter the Consumer Financial Protection Bureau (CFPB). All 1,700 workers were sent home in early February, and Elon Musk tweeted out "CFPB RIP."

While the bureau’s staff union and other groups have been fighting these layoffs, and some workers were called back, the reality is that the CFPB has spent years dedicated to fighting against consumer fraud and abuse.

When the agency’s work was halted, as reported by U.S. News & World Report, it put a temporary — and perhaps permanent — pause on several pending cases, including against Capital One for misleading customers and costing them $2 million in missed interest payments; against Zelle over fraud on its platform that caused hundreds of millions in losses; and against Walmart for charging millions in junk fees.

The CFPB also worked to limit excessive overdraft and credit card fees, restricted lending to high-risk borrowers and took other actions to rein in predatory lenders.

All of these efforts could end, leading to banking and other financial products becoming more expensive and consumers facing an increased risk of wrongful behavior by big companies.

Consumers will need to wait and see if these layoffs become permanent, and if the changes to these agencies actually go forward. If so, they may be left coping with the financial fallout — and with less resources available to help respond to newfound challenges.

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The upper middle class earns more than the typical American, and has disposable income to live a nice lifestyle – although they aren’t rich in the sense that they don’t have to worry about money or work for it.

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ScienceDirect defines it as a social group within the middle class that includes wealthy property owners, entrepreneurs, individuals with high salaries, and highly educated professionals.

The household income you need to break into the upper middle class in America varies by state, and the average is $122,171 per year, according to a GoBankingRates analysis of Census data. Since the median household income in this country is $78,538, that’s quite a bit more than most people earn.

In the 19 poorest states in America, your household salary can be below $122,171— and sometimes well below it — and you would still be classified as upper middle class.

Here’s how much you’d need to earn in these 19 states, along with some details on how you can move yourself up financially no matter where you live.

Here’s what it takes

According to GoBankingRates, this is the annual household income you would need to be in the upper middle class in the poorest U.S. states.

Mississippi: $85,424 to $109,830

Louisiana: $93,370 to $120,046

New Mexico: $96,640 to $124,250

West Virginia: $90,094 to $115,834

Kentucky: $97,094 to $124,834

Arkansas: $91,426 to $117,546

Alabama: $96,487 to $124,054

Oklahoma: $98,939 to $127,206

South Carolina: $103,940 to $133,636

Tennessee: $104,374 to $134,194

Texas: $118,677 to $152,584

Georgia: $116,145 to $149,328

Ohio: $108,392 to $139,360

North Carolina: $108,741 to $139,808

Michigan: $110,677 to $142,298

Arizona: $119,580 to $153,744

Missouri: $107,210 to $137,840

Florida: $111,551 to $143,422

Nevada: $117,540 to $151,122

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As you can see, many of these states are in the South, where the cost of living tends to be much lower. In Mississippi, for example, Bestplaces reports a family needs just $29,880 per year to live comfortably, which is 53.9% less expensive than the national average.

Housing, transportation, and childcare all come at a lower cost in Mississippi than in many parts of the country, making it easier to afford to live on less. Because of the lower cost of living, salaries on the whole tend to be lower, with the median household income coming in at $54,915 in the state.

Since wages and costs are lower, it’s not a surprise that you don’t need to earn as much to be in the upper middle class. And this trend holds true for the other low-cost states on this list as well.

How to increase your income — and class bracket — no matter where you live

Whether you live in one of these poorer states or you live in a rich one, it’s always a worthwhile goal to try to increase your income as much as possible. That’s not to compete with your peers, but because more disposable income helps you to secure your financial future and live a life free of money worries.

Fortunately, there are many ways to increase what you earn and set yourself up for a better life.

One of the best ways to do that is to get more education, either by going to school for longer or by participating in training programs at work. If you can pursue advanced education, aim to do that when possible. For 25- to 34-year-olds who worked full time, year round, the median earnings of those with a master’s or higher degree ($80,200) were 20% higher than the earnings of those with a bachelor’s degree ($66,600) as their highest level of attainment, according to the National Center for Education Statistics.

You can also consider working a side gig to bring in extra income, or developing multiple streams of income, such as investing in real estate or dividend-paying stocks.

Simply negotiating your salary when you get hired or when you look for a new job can also make a huge difference, as Pew Research reported in 2023, among workers who did ask for higher pay, 28% said they were given the pay they asked for and 38% said they were given more than was originally offered but less than they had asked for.

By taking these steps, hopefully you can break into the upper middle class, or even become rich, depending on where you live. It’s well worth the effort, as the more you earn, the higher your Social Security checks and the more money you can save and invest during your lifetime to build the financial security you deserve.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Scammers are getting bolder — and consumers are paying the price.

In 2024 alone, fraud cost Americans more than $12.5 billion, a staggering 25% increase from the previous year, according to newly released data from the Federal Trade Commission.

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Investment scams were the most costly, accounting for $5.7 billion in losses, a 24% increase from the previous year. In comparison, imposter scams, the second most common type of fraud, cost consumers $2.95 billion.

So, what kinds of investment scams are causing consumers so much, and how can you protect yourself? Here’s what you need to know.

Common investment scams

The Washington State Department of Financial Institutions provides a helpful list of common investment fraud schemes, including:

• Fraudulent promissory notes – Short-term notes offered by fake companies that promise high returns but fail to deliver.
• Ponzi or Pyramid schemes – Existing investors are paid money from new investors, while the actual "assets" being invested in either don’t exist or are worth very little.
• Real estate investment fraud – Scammers convince investors to put money into "hard money loans" or "property flipping" schemes, often misleading them about the risks, potential returns or property values.
• Cryptocurrency scams – Fraudsters create fake coins, heavily promote them and sell them to investors. Once the price rises, they cash out, leaving the coins worthless.

The U.S. Secret Service also warns about "pig butchering" scams, where fraudsters build trust with victims before tricking them into investing in fake cryptocurrency projects.

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How can you protect against fraud?

You don’t want to fall victim to these scams, so watch for three key signs of investment fraud:

• Impersonation of a trusted source – Scammers may pretend to be government officials, financial advisers or even friends and family members. If you get an unexpected call from a government agency or familiar contact, hang up, look up the phone number and call the agency or your family member yourself.
• High-pressure tactics and urgency – If you are told you must invest immediately and discouraged from researching the opportunity or consulting others, it’s likely a scam. Legitimate investments don’t require rushed decisions. Always take time to verify information.
• Untraceable payment methods – Be wary if you’re asked to pay using cryptocurrency or wire transfers. Scammers prefer these payment methods because they are hard to trace, making it nearly impossible to recover the lost funds.

As a general rule, avoid investing in:

• Anything you learn about on social media.
• Opportunities you don’t fully understand.
• Offers that rely on aggressive sales tactics.

By staying vigilant, you can avoid losing money and becoming one of the millions targeted by scammers who promise great investments only to disappear with your cash.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

President Donald Trump is not a fan of wind energy, in part because he believes it’s having an adverse effect on the whales.

“You know, in one area, they lost two whales, like, in 20 years washed ashore,” the president told reporters at the White House recently, “This year they had 17 wash ashore. So, there’s something [that] happened out there. There’s something driving the whales a little bit loco.”

While many scientists dispute this claim, the fact is that the president is taking action to slow or even stop the development of this energy source.

Specifically, he has temporarily halted the new leasing of federal waters for offshore wind projects. He has also directed federal agencies to pause permits and approvals of on- and off-shore wind development, including the already approved Lava Ridge Wind Project in Idaho.

Unfortunately, this will impact American jobs, as the offshore wind sector was expected to employ 56,000 more people by 2030, according to a report by American Clean Power. It could also affect both the reliability and cost of electricity.

Research has shown that producing wind power can be a very cost-effective way of providing power. Texans, for example, are saving as much as $20 million per day thanks to wind and solar energy, according to the Rocky Mountain Institute.

With the development of wind power paused, the result could be higher energy bills. Consumers should start preparing for this possibility by taking a few key steps to help keep their utility costs down. Here are three options.

Invest in energy-efficient home upgrades

There are many upgrades you can make to your home that can help reduce the amount of electricity you use and, in turn, help keep your costs down.

One of the best options is upgrading to energy-efficient appliances. According to Energy Star, if you choose certified appliances, you can save around $8,750 on utility bills over the life of the product, reducing the cost of running the appliance by around 30%.

While the U.S. Department of Energy suggests that you can save around 10% on your utility bill by adjusting your thermostat back 7 to 10 degrees for 8 hours each day. Programmable thermostats can make this process automatic, which makes saving money even easier.

Other upgrades could include energy-efficient windows, adding more insulation to your home and using power strips to shut off the electricity to electronics and appliances, avoiding phantom power loss when you aren’t using them. All of these steps can help you spend less on powering your home — even if you have no choice but to rely on fossil fuel energy.

Consider renewable energy at home

Installing solar panels at home can be a great investment. Energy.gov reports that the payback time for most homeowners is less than 10 years.

There are both state and federal incentives for installing solar power in many parts of the country, and you may be able to finance your system through a personal loan. You could also enter into a power purchase agreement, which means you wouldn’t own the panels but would benefit from the clean power produced and still enjoy lower utility bills.

The Database of State Incentives for Renewables & Efficiency can help you find programs in your area, and the Residential Clean Energy Credit, in effect through 2032, provides a tax credit equal to 30% of the cost of installation, which can be a big savings.

Shop around for your energy supplier

In many parts of the country, you can also shop around for an electricity provider. Around 45 million consumers benefit from retail energy choice, and you can find out if you are one of them by visiting the website of your state’s utility commission.

If you live in a deregulated market and have the choice of who provides your electricity, you should compare options to see which company will charge you the least for the power you use. Many companies lock in your rate only for a limited period, so you may have to do this a few times a year — but you can realize potentially significant savings.

Taking these steps could help you avoid increased electricity costs that you may be faced with if a shift towards alternative energy is held up at the federal level. Regardless, it can be worth finding ways to cut your utility bills, especially if you can invest a little bit up front and enjoy reduced costs for years to come.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Grocery shoppers have been forced to scramble since egg prices have been consistently high.

With the cost of Grade A eggs hitting a record high of $5.90 per dozen in February, many consumers have had eggs on their faces. This was the highest price consumers had ever paid for eggs, nearly double what they had paid the previous year.

Some relief may finally be on the way, as the wholesale egg prices have started to fall.

However, Easter and a lag between the changes in wholesale and consumer prices may mean that relief doesn’t come immediately for frustrated grocery shoppers, many of whom have struggled with high food inflation since the pandemic.

Here’s why egg prices are finally falling

Egg prices peaked due to a deadly outbreak of bird flu that spread across the United States, resulting in the death of millions of egg-laying chickens. Major producers may also have engaged in alleged anti-competitive behavior to drive prices up, prompting an antitrust investigation by the Department of Justice in March.

The good news is that outbreaks of bird flu appear to be becoming less frequent. Additionally, high prices have weakened consumer demand, with many people choosing to forgo purchasing eggs due to record costs. Some buyers, fearing further price increases from continued bird flu outbreaks, also stockpiled eggs, reducing future demand further. With higher supply and lower demand, prices have begun to drop.

“Slowing outbreaks are leading to improved supply availability and wholesale market prices have responded with sharp declines over the past week,” the USDA wrote.

The drop in wholesale egg prices has been significant, with the cost per dozen dropping 44% from its mid-February peak. Wholesale prices are now $4.83 per dozen instead of $8.58 per dozen, according to Expana, which tracks agricultural commodity prices.

Karyn Rispoli, an egg market analyst and managing editor at Expana, told CNBC via email that prices had plunged due to market dynamics placing "extreme pressure" on the cost per dozen.

The Trump Administration also initiated a plan to help lower prices, including investing $500 million in biosecurity improvements, providing more indemnity payments to farmers, reducing regulations and importing more eggs to increase supply.

Consumers may not see lower prices just yet

While the reduced wholesale cost is good news, it doesn’t mean consumers will enjoy cheaper eggs just yet.

Rispoli explained that there’s typically a two to three-week lag between a change in wholesale prices and a decline in retail prices. Retailers also don’t always adjust their prices immediately to match wholesale fluctuations, meaning consumers may still feel the effects of peak prices when they shop for eggs.

Consumers have seen some relief. U.S. Secretary of Agriculture Brooke Rollins stated, "The average cost of a dozen eggs has now gone down $1.85 since we announced our plan."

However, this trend of reducing prices is not likely to last in the short term. Prices are expected to rise again with Easter, which traditionally increases demand for eggs. Easter season typically leads to increased egg demand for traditional activities like Easter egg dyeing, as well as hard-boiled eggs, which are a staple for many Easter meals.

Hopefully, once Easter comes to pass, the Trump Administration’s efforts and the declining number of bird flu outbreaks will lead to more lasting price reductions, allowing consumers to put eggs in their grocery baskets without fear of cracking their budgets.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

DoorDash is best known as an app that allows people to order food for delivery. That’s why it may come as a surprise that it’s partnered with a service called Klarna that allows customers to finance purchases.

It may seem odd to finance — or pay over time — for takeout food, but the company’s head of money products recently explained why DoorDash made this choice.

"As we expand DoorDash’s offerings — from groceries and beauty to electronics and gifts — flexible payment options are essential to meeting our customers’ needs,” Anand Subbarayan, the company’s head of money products, explained in an announcement about the new partnership.

Regardless of the reasoning, however, there are many experts who are concerned that this "eat now, pay later" arrangement will only add to America’s debt binge and lead people into financial trouble that makes it harder for them to make ends meet.

Understanding the new payment options on DoorDash

Under the new partnership with Klarna, DoorDash users will have three choices when they pay for their purchases. They can:

• Pay in full at the time of the order.
• Pay in four, breaking up the payment into four equal installments that are interest-free.
• Pay later, which allows customers to defer payments until a specific time, such as the day that they get paid.

"This partnership empowers customers with maximum choice and control over how they pay – from groceries and the season’s big-ticket electronics to home improvement supplies, beauty and even their DashPass Annual Plan membership," the DoorDash announcement said.

Both the pay in four and pay later options are considered buy now, pay later (BNPL) products. On May 22, 2024, the Consumer Financial Protection Bureau (CFPB) issued new rules confirming that BNPL lenders should be treated like credit cards and consumers must be extended the same protections card issuers provide, including the right to dispute charges and to demand a refund after returning products purchased using BNPL.

Unfortunately, even with these protections in place, BNPL increases the risks of financial problems for consumers. Research published in Harvard’s Journal of Marketing shows that consumers who used BNPL were likely to spend more, with the likelihood of completing a transaction increasing from 17% to 26%. Basket sizes for BNPL orders were also 10% larger on average, and the increase in spending that resulted persisted for six months.

Financially constrained shoppers who often rely on credit were the most vulnerable to these spending increases, increasing their basket size by 14%.

Experts are concerned about BNPL for DoorDash

The addition of Klarna as a payment method did not go unnoticed, with experts having a lot to say about the idea of borrowing money for takeout food.

“Eat now, pay later is an awful trap,” Douglas Boneparth, president of Bone Fide Wealth, said on X. “If you need to borrow to have a burrito delivered to you, you are the product. Nothing more. These companies aren’t helping people. In fact, they are taking advantage of them.”

There’s also concern that offering this easy access to credit could worsen the debt binge already going on in the United States. Debt binge is an over-reliance on credit of all types. As data from the Federal Reserve in February showed:

• Credit card balances were up $45 billion and hit $1.21 trillion by the end of December 2024.
• Auto loan balances increased $11 billion to $1.66 trillion.
• Mortgage balances increased by $11 billion to $12.61 trillion.
• HELOC balances increased by $9 billion to $396 billion.
• Retail credit cards and other consumer loans grew by $8 billion.
• Student loans grew by $9 billion and hit $1.62 trillion.

Continued borrowing at these levels may be unsustainable, and now consumers could add DoorDash debt to this list.

Unfortunately, researchers from the CFPB found that once people begin to rely on BNPL services, they do so again and again. In fact, the CFPB showed 63% of borrowers originated multiple simultaneous BNPL loans at the same time at some point during 2022.

So, while it may be tempting to pay for a food purchase in installments or defer payments until payday — especially if you feel like you need a treat and don’t have much cash to your name — you likely want to avoid this option.

Instead, you should stick to a budget that includes a set amount of spending for things like DoorDash so you can splurge guilt-free without borrowing while also saving for the future. If you can’t afford an unnecessary purchase like DoorDash, just consider saying no to it and cooking at home.

Deleting apps that make overspending easy may be the next move. Getting back to classic home cooking can make a big difference in your total expenditures — even if you aren’t financing your deliveries.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.