What to know about 'buy now, pay later' for travel

When it comes to planning a vacation, travel expenses can add up quickly. You might be tempted to choose the 'buy now, pay later' option offered by travel sites like Expedia.

BNPL is seductive to consumers who'd rather make fixed smaller payments over time than one large lump sum.

But is using buy now, pay later for flights and hotel stays too good a good idea?

Also known as point-of-sale loans, 'buy now, pay later' (BNPL) programs allow consumers to enroll in a short-term payment plan without the fees and hassle of a credit card.

You can typically enroll right at checkout or directly on the BNPL provider's website ahead of time. Some of the most popular providers are Afterpay, Affirm, Klarna and Uplift.

Point-of-sale loans give consumers the ability to make monthly or bi-monthly payments over a fixed period, usually several weeks or months. You can automate payments using your debit card or bank account information.

While many providers boast 0% interest rates, some point-of-sale loans can have interest rates upwards of 30%, higher than the APRs on many credit cards.

Klarna offers point-of-sale loans, some with 0% APR, that allow you to make four payments every two weeks and require a deposit at checkout, while Afterpay allows you to pay over six weeks.

Afterpay, Klarna and Affirm also offer consumers longer payment periods of up to one, two or even five years.

When you purchase a flight, reserve a room or purchase an item, you're given different financing options at checkout.

If you choose a point-of-sale (POS) loan, you'll be redirected to the provider website, where you'll apply using your personal information. Some POS companies perform a soft credit check, which won't negatively impact your credit score, but others do hard inquiries, which temporarily decrease your score.

Historically, BNPL loans weren't reported to the major credit bureaus and late payments didn't impact your credit score. That is changing, however, as the popularity of point-of-sale loans soars.

BNPL users routinely spend more than non-users and more than 40% admit they were late on at least one payment in 2024, according to a LendingTree survey.

If you're using BNPL to finance your vacation, make sure it's still within your budget and that you'll have enough incoming funds to make all your payments in full.

Travel expenses might seem like the perfect opportunity to use a point-of-sale loan because it's oftentimes a big purchase that you might not have the immediate cash on hand to cover.

Afterpay, Affirm, Klarna and Uplift all offer 'buy now, pay later' option for various travel partners. Affirm, for example, has partnerships with Delta Vacations, Priceline, StubHub and flight booking site Alternative Airlines.

Uplift is exclusively focused on point-of-sale loans for travel, with around 200 travel partners, including United Airlines, Kayak, Southwest Airlines and Sandals. It helps borrowers cover transactions costing anywhere from $100 to $25,000, although your APR can range from 0% to 36%.

A few Uplift partners, like Carnival Cruise Line and Atlantis, have a 0% APR, but the average is 15%, not far off from the average APR for credit cards

"We use a variety of factors to determine eligibility," said Tom Botts, chief commercial officer at Uplift. "Interest rates are based on a number of factors including credit history, transaction amount and time to travel."

Uplift also only performs a soft credit check which won't negatively impact your credit score.

If you're able to secure a loan with 0% APR and make your payments on time, a point-of-sale loan can be a way to finance a trip. But if those monthly payments don't easily fit within your budget, be careful

If you use Affirm to finance a trip on Alternative Airlines, you can get a 0% APR on a three- or six-month point-of-sale loan, but only if its less than $500. Anything more than that can rack up a 15% APR. So, if you spend $1,000 on a flight through Affirm and choose a 12-month payment plan , you'll have to cough up almost $100 extra in interest.

You will have more time to pay the loan ( typically 3, 6, 12 or 18 months) and if you do incur interest, it won't compound.

On the other hand, you won't be able to rack up or take advantage of any credit card rewards points or travel protection for things like trip cancellations or delays.

"If a trip is canceled or delayed , your loan is still due," says Priya Malani, the CEO and founder of Stash Wealth. "Even though you may have checked out in one fluid process, you're still working with two separate entities — the travel provider and the POS loan provider,"

When it comes to funding a resort stay in Cancun or a flight to the Maldives, there are other options for financing your trip.

Travel rewards credit cards offer higher rewards rates for money spent on travel and the points you earn can go toward booking flights or hotels. While travel credit cards typically come with an annual fee, some offer a 0% introductory period, so you won't have to worry about high interest rates kicking in for 12 months or longer.

If you go the 0% APR route, make sure you set up a repayment plan and pay the minimum each month so you don't end up paying late fees or big interest charges.

The Chase Sapphire Preferred® Card (See rates and fees) is currently offering a welcome bonus offer where new cardholders can earn 75,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening.

The Capital One Venture Rewards Credit Card is also a solid choice and comes with a higher rewards rate than the Preferred, giving 2X miles per dollar on every purchase and earn a welcome offer of a one-time bonus of 75,000 miles once you spend $4,000 on purchases within 3 months from account opening, equal to $750 in travel.

Travel cards also often come with additional perks such as car rental insurance, trip cancellation insurance and purchase protection. You won't get any of these perks when you use a POS loan for travel.

You might also think about creating a travel fund in a high-yield savings account. Thanks to compound interest, you'll be earning more than you would in a checking account or a traditional savings account.

A separate travel fund will make it easier to stay focused on your goal, and setting up automatic monthly transfers can keep you from spending money on other things.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of buy now, pay later loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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