Image source: Getty Images
Buy now, pay later, or BNPL, plans have become extremely popular in recent years, to the point where it’s rare to find an online merchant’s checkout window that doesn’t offer some sort of BNPL option. This is especially prevalent in situations where purchase prices tend to be high, such as travel. And while it can be tempting to split an airline ticket, hotel stay, or cruise vacation over a series of installments, it isn’t always a good idea for your personal finances. Here’s a look at some of the benefits of BNPL plans to pay for travel, as well as some of the drawbacks to keep in mind.
1. No interest in many cases
Some buy now, pay later plans are interest free, and the merchant pays a fee to the BNPL lender for providing the financing. This is especially common when you split a purchase into a small number of installments, such as Affirm’s Pay in 4 BNPL option.
However, even with 0% financing, be aware that you can get hit with fees and/or interest if you miss a BNPL payment, and these can be rather high in some situations. And not all BNPL plans are interest free — some have interest rates as high as 36.99%.
2. Easy qualification
Several buy now, pay later services don’t perform credit checks as long as you have a verified bank account. Others use a soft credit pull, so applying doesn’t affect your credit score, and a hard credit check is typically only used in cases where you make an especially large purchase, or you choose a long repayment term. And even if a BNPL service does check your credit, the qualification standards are typically rather low compared with applying for a new credit card.
3. Equal monthly payments
Splitting a purchase into equal monthly payments or at other intervals that coincide with when you get paid can make it easier to budget for travel. For example, splitting a $500 airline ticket into five equal $100 installments can automate the repayment process and make it easier to fit the purchase into your budget.
You can theoretically do this with a credit card, but it isn’t automated (although some credit cards have been rolling out “pay in installments” features for larger purchases).
Some downsides of BNPL for travel
Like most financial products, buy now, pay later plans aren’t ideal for all situations. For example, BNPL programs don’t earn rewards like some of the top travel credit cards do. There are cards on our top travel credit card list that offer 0% intro APRs for well over a year and have excellent reward earning rates on purchases.
Plus, while some BNPL services don’t do a hard credit pull, the caveat is that many also don’t report your payment history to the credit bureaus. So, if you make your payments on time every month, it might not help you build credit. It is especially common among BNPL services that split purchases into a small number of installments to not report activity to the credit bureaus.
Finally, BNPL can make it easy to get in over your head on purchases. The same can certainly be said with a credit card, but at least you’ll get a running total of the purchases you’ve made and how much you owe. Each BNPL purchase is often treated as a separate account, and it can be easy to lose track of how much you’re spending.
The bottom line
Like any financial product, buy now, pay later plans can be a valuable financial tool when used correctly. Just be sure that you understand the pros and cons, as well as the potential complications of using BNPL for too many purchases, before you decide to proceed.
Alert: highest cash back card we’ve seen now has 0% intro APR until 2025
If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
