With more Americans getting close to maxing out their credit cards, they are turning to "buy now, pay later" (BNPL) financing.

Analysts call this financing "phantom debt" because there's no way to monitor it.

Unlike credit cards, BNPL loans allow shoppers to pay for purchases immediately without hard credit checks and a lengthy approval process. Many programs charge no interest rates and offer other incentives to lure in customers.

Some of the most popular BNPL programs are offered by providers like Afterpay, Klarna, Affirm, and even PayPal.

Bruce McClary, a spokesperson for the National Foundation for Credit Counselling, said the growing popularity of BNPL signals "an increase of short-term debt on top of the more than $1 trillion in outstanding credit card balances."

Although data on BNPL programs is hard to come by, Adobe Analytics reported a sharp uptick in their usage during this year's Cyber Week sales event.

In fact, it's estimated that BNPL contributed $940 million to online spending over the five-day sales event, an increase of 42.5% compared to 2022.

For November, "buy now, pay later" spending reached a staggering $8.3 billion—up 17% from last year.

While BNPL lets consumers kick the debt can further down the road, experts warn that these programs pose a great danger to personal finances and are a ticking time bomb for the economy.