The Illusion of Affordability: The Psychology Behind Installments

By: Jonathan Gunawan[i] & Bonar Hutapea[ii]

JurnalPost.com - Why does something that feels too expensive to pay for today suddenly feel affordable when the payment is deferred?

The item is the same. The price has not changed. Only the method and timing of payment have changed. Yet, this technically administrative shift can alter how we perceive price, assess affordability, and make decisions.

This is where consumer debt stops being merely an accounting issue and starts becoming a psychological one. Debt does not always begin with a desire to borrow; sometimes it starts with something much simpler: a desire that does not want to wait.

The buy now, pay later (BNPL) phenomenon illustrates this shift. The Financial Services Authority (OJK) noted that as of May 2026, the outstanding BNPL credit balance reached IDR 30.1 trillion, a 37.72 percent year-on-year increase, across 31.76 million accounts. What is interesting for psychology is not just the magnitude of these figures, but the change in the environment where consumption decisions are made.

We are accustomed to viewing financial decisions as a matter of calculation: the price of the item, income, interest rates, and installment amounts. All of these are important. However, humans do not make decisions solely with a calculator. They make decisions with limited attention, emotions, habits, and cognitive biases.

When Only the Installment Is Visible

Humans are not always good at designing time. We tend to place greater weight on satisfaction that is present now, while consequences that appear later feel more distant. In behavioral economics, this tendency is known as present bias.

The desire is present now. The item can be enjoyed now. Payment can be made later. The distance between consumption and payment is not just a matter of time; it can change the psychological experience of the decision.

Imagine an item worth IDR 3 million. When it must be paid in full, we face the IDR 3 million figure in its entirety. This triggers what Prelec and Loewenstein call the pain of paying—the discomfort of having to part with limited resources. That discomfort is actually a protective mechanism: it makes us think twice before buying.

But when that price is presented as an installment, attention can shift from the total obligation to the amount that must be paid now.

The question changes from:

“Can I afford to buy an item for IDR 3 million?”

to:

“Can I afford to pay IDR 250,000 this month?”

Arithmetically, the obligation has not changed. Psychologically, the center of attention has shifted. Installments seem to reduce a mountain of obligation into pebbles that are easier to swallow.

This is where Richard Thaler's concept of mental accounting becomes relevant. Humans do not always treat all money as a single entity. We group it into mental categories: salary money, savings, shopping money, or installment money. Spending IDR 250,000 from the “installment bucket” is not always spontaneously felt as a reduction in wealth equal to the total price of the item.

Therefore, the issue is not just how expensive an item is, but how that cost appears in our minds.

Same Price, Different Experience

Empirical research on BNPL further reinforces this issue. Several studies in the Journal of Consumer Research and the Journal of Retailing show that BNPL usage is associated with higher spending. When prices are presented in installments, the perception of the purchase's cost can decrease, and spending increases.

These findings shift the question from “Why are people so consumptive?” to a more interesting one: How does the payment format change the way a decision is perceived?

Payment methods, therefore, are not just technical facilities chosen after a purchase decision is made. They can be part of the decision environment itself—what is known in behavioral literature as choice architecture.

The difference seems small.

The consequences can be significant.

Us and Our Future Selves

There is another psychological layer that makes consumer debt even more interesting to understand: our relationship with our future selves. Research by Hal Hershfield and his colleagues shows that when humans imagine themselves in the future, the psychological representation of the “future self” can differ from when they think of their current self. Follow-up experiments even show that making people more connected to their future self-image can increase their tendency to save.

The implications for consumer debt are intriguing.

When we buy something today with money that will be earned later, we are essentially making a decision whose consequences will be borne by our future selves. The problem is that the future self often feels psychologically more distant than our current self.

Therefore, the issue of debt is not just about money. It also concerns the human relationship with oneself across time.

Desire Is Not Born in a Vacuum

However, desire does not arise in a vacuum. In the digital economy, we constantly see goods, experiences, lifestyles, and symbols of success. Social media can shorten the distance between seeing, wanting, and buying. Consumption can even become a symbol of social status.

A young worker who sees others showing off the latest smartphone, for example, does not just see an object. They may see an image of the life they want to have.

But the issue also has a structural dimension. The pressure of the cost of living, economic inequality, and limited income make some people use BNPL not merely because of impulsivity, but because of the limited ability to pay in full. Therefore, this phenomenon should not be simplified as a moral failing of the consumer.

On the other hand, digital design can indeed reduce friction in decision-making. When the “Pay Later” button appears exactly when the desire arises, the distance between “I want” and “I buy” becomes shorter.

Therefore, the important question is not just:

“Why aren't consumers more disciplined?”

but also: “How does the decision environment affect the discipline they are currently exercising?”

Not Just a Lack of Discipline

Debates about consumer debt often end with advice for the public to be more disciplined and improve financial literacy.

That advice is correct, but incomplete. Knowing interest rates, fees, due dates, and total obligations is clearly necessary. However, knowledge does not automatically erase present bias, mental accounting, or our tendency to ignore our future selves. Therefore, it is inaccurate to simplify the issue as a moral failing of the consumer. But it is also inaccurate to assume BNPL is always bad.

Under certain conditions, BNPL can provide payment flexibility and help meet needs that are indeed important or productive. The problem arises when such convenience is used to satisfy impulsive desires, while the financial consequences are underestimated.

This is where responsibility must be shared. Individuals need the ability to make decisions; Industry needs responsible design and information; Regulators need rules that ensure financial innovation does not develop at the expense of consumer understanding.

From Financial Literacy to Psychological Literacy

Therefore, perhaps we need to expand the definition of financial literacy to include psychological literacy. The public does not only need to know how much to pay, but also understand why something can feel more affordable when paid in a different way.

There are three simple questions that can help.

First, calculate time, not just money. How long do we have to work to pay off that obligation?

Second, recognize the anesthesia of payment. If the item had to be paid in cash today, would we still want it? If the answer is no, perhaps what is attractive is not just the item, but the ease of payment.

Third, empathize with your future self. Imagine ourselves six months or one year from now as someone who also deserves to be protected.

On the industry side, the total obligation—including fees, interest, and penalties—should be displayed clearly, no less prominently than the monthly installment. The principle is simple: Do not make a risky decision feel simpler than the risk itself.

This is not a call to reject financial technology. On the contrary, innovation will be healthier if it is designed with an understanding of how humans actually make decisions, not how humans should make decisions if they were perfectly rational beings.

Learning to Delay

Ultimately, the issue is not whether humans are allowed to have desires. Desire is part of life. It makes humans work, strive, save, plan, and even dream.

What needs to be questioned is when desire turns into a decision, when a decision turns into an obligation, and why the distance between the three is getting shorter.

We may be too busy teaching the public how to count money, but pay too little attention to how humans feel money. Yet financial decisions are not made only by calculators. They are made by humans—with limited attention, emotions, habits, biases toward present satisfaction, and often blurred visions of the future.

Therefore, a financially healthy society is not built enough by asking everyone to be more disciplined. We also need a decision environment that makes healthy choices easier and risky decisions feel less light.

Because before an obligation is recorded as a number in a credit report, it often starts from something much simpler and more human: a desire that does not want to wait—and a brain that forgets that the person who will pay for it later is themselves.

[i] Student at the Faculty of Psychology, Tarumanagara University.

[ii] Lecturer at the Faculty of Psychology, Tarumanagara University. Interested in Economic Psychology, Consumer Psychology, and Digital Psychology.