1 in 5 Americans plan to use ‘buy now, pay later’ to pay for a holiday — but is splitting up your beach vacation into bite-sized payments a bad idea?

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.

Convenience — but at what cost?

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 NYT 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 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.

How to use BNPL for travel

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.