With prices rising and airfare still sky-high, the “buy now, pay later” (BNPL) boom has officially hit vacations. More than half of Americans now use BNPL, and nearly one in five plan to use it to pay for holidays, according to The New York Times (NYT). (1)
But experts warn that while spreading out payments for a beach getaway may seem harmless, it can come with hidden risks.
BNPL plans divide payments into installments. “Break anything into four and it’s more affordable, but life happens and people forget and fees add up and you have very little recourse,” Julie Beckham of Rockland Trust, who studies BNPL plans, told the NYT.
Before booking your trip, make sure you know the pros and cons of BNPL.
“Buy now, pay later” (BNPL) plans lure consumers with convenience. These short-term installment loans let users split a one-time expense — like a vacation package — into smaller, more manageable payments.
According to the Consumer Financial Protection Bureau (CFPB), most basic “pay-in-four” plans don’t require a hard credit check and charge no interest if payments are made on time. That makes them appealing for people looking to smooth short-term cash flow. (2)
But the downsides can hit hard. The CFPB reports that late fees are common, and those penalties can add up quickly — sometimes wiping out any benefit of spreading out payments.
According to the aforementioned New York Times article, services like Afterpay can charge up to $68 in late fees, while Klarna caps its fees at $7. And unlike credit cards, BNPL loans typically don’t come with travel protections, insurance, or rewards points. “With travel, when you use a credit card, you are protected,” Beckham told the NYT.
The risks rise even further with longer-term BNPL loans, which often begin accruing interest immediately. Stanford researcher Ed deHaan told the NYT that he calls it “a buyer-beware moment,” warning that “the terms are actually worse than a credit card because most credit cards don’t accrue interest until after 30 days.”
Beyond the fees and interest, consumers should be wary of debt stacking. Because BNPL makes it so easy to click “buy now,” it can be easier to accumulate multiple small debts that add up quickly.
Despite the risks, BNPL travel products are multiplying. Flex Pay partners with United Airlines, Carnival Cruise Line, and Wyndham Hotels to offer loans from 0% to 36%. Paylater Travel lets users lock in flights now and pay over 26 weeks.
BNPL use is widespread and growing. Federal Reserve data show that use rose to 14% of adults in 2023, up from 10% in 2021. (3) The Fed found that financially strained consumers are among the most frequent BNPL users.
The Consumer Financial Protection Bureau (CFPB), which has been closely tracking the industry, also found heavy BNPL use among borrowers who carry multiple BNPL loans and high credit card balances.
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Still want to use BNPL for travel? Only do so if you have the cash flow to cover all upcoming installments — not because you expect future income.
Here are some key considerations:
Read the fine print. Check all service fees and refund policies. If you cancel a booking, BNPL platforms may still charge service or cancellation fees, and you may have to keep making payments while waiting for a supplier refund.
Airline or hotel refunds can take weeks, leaving you temporarily out of pocket and creating short-term cash flow stress.
Watch for currency risks. If your trip is booked in a foreign currency but repaid in U.S. dollars, exchange rate fluctuations can increase your costs. Also avoid dynamic currency conversion (DCC) at checkout — its marked-up rates can make your trip pricier. In short, paying later can mean paying more.
Time your payments carefully. BNPL sometimes lets you travel before finishing payments. But if an emergency or income loss occurs after your trip, missed payments can trigger late fees or damage your financial stability.
Know the credit impact. BNPL’s effect on credit depends on the provider. Some providers now report loans to credit bureaus, and such reporting is becoming more common. That means BNPL behavior may start to affect your credit score more directly — meaning BNPL behavior can increasingly affect your credit score.
Consider opportunity cost. Every BNPL payment is money you can’t put toward an emergency fund, high-yield savings, or investments. Those “lost” returns are an invisible cost.
Compare with a rewards credit card. Using a BNPL instead of a rewards credit card may mean losing out on travel miles, hotel points, or statement credits — benefits that can easily outweigh BNPL’s short-term convenience.
BNPL can make your dream vacation possible, but it can also ground your finances if used carelessly.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
New York Times (NYT) (1; Consumer Financial Protection Bureau (CFPB) (2); Federal Reserve (3).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
