3 reasons why ‘buy now, pay later’ plans are becoming increasingly popular in travel

Buy now, pay later (BNPL) plans have become so popular in recent years that it’s almost difficult to find them at online merchants’ checkout windows. Not like that It offers some sort of BNPL option. This is especially common in situations where purchase prices are high, such as travel. It may be tempting to split flights, hotel stays or cruises over several trips, but it’s not always a good idea for your personal finances. Let’s take a look at the pros and cons of BNPL travel payment plans to keep in mind.

1. Often not interested

Some buy now, pay later plans are interest-free and sellers pay a fee to the BNPL lender for providing the financing. This is especially common when you split your purchase into fewer installments, like Affirm’s Pay in 4 BNPL option.

However, keep in mind that even with 0% financing, you may be charged fees and/or interest if you miss a BNPL payment, which may be somewhat higher in some situations. And not all BNPL plans are interest-free plans. Some have interest rates as high as 36.99%.

2. Easy qualification screening

Many buy now, pay later services won’t run a credit check 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 usually only used if you’re making a particularly large purchase or have chosen a longer repayment term. And even if a BNPL service checks your credit, the eligibility criteria are typically lower than applying for a new credit card.

3. Equal monthly payment

Budgeting for travel can be made easier if you split your purchases into equal monthly payments or at different intervals based on when your payments are due. For example, splitting a $500 airline ticket into five $100 installments automates the repayment process and makes it easier to fit your purchase into your budget.

In theory, you could use a credit card to do this, but it’s not automated (some credit cards are rolling out a “pay in installments” feature for larger purchases).

Some Disadvantages of BNPL for Travel

As with most financial products, buy now, pay later plans aren’t ideal for every situation. For example, BNPL programs don’t earn rewards like some of the best travel credit cards. Our list of the best travel credit cards includes cards that offer 0% introductory APR for over a year and offer excellent rewards earning rates on purchases.

It’s also important to note that while some BNPL services do not carry out strict credit collection, many do not report payment history to credit bureaus. So paying on time every month may not help you build your credit. Splitting a purchase into a small number of installments to avoid reporting activity to credit bureaus is especially common with BNPL services.

Lastly, BNPL makes it easy to get your head around your purchases. The same goes for using a credit card. But at least you can see both how much you bought and how much you owe. Each BNPL purchase is often accounted for in a separate account, making it easy to track how much you’re spending.

conclusion

Like any other financial product, buy now, pay later plans can be a valuable financial tool when used correctly. Before you decide to proceed, make sure you understand the pros and cons and the complications that may arise if you use BNPL for too many purchases.

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