Buy Now, Pay Later Loans Are a Risky Way to Pay for Travel

The buy now, pay later industry is best known for its no-interest, no-fee “pay-in-four” loans, which consumers pay back in four installments over about two months. Because pay-in-fours don’t require the kind of “hard” credit check that can affect one’s credit score, these loans are often approved in seconds. 

Buy now, pay later companies also offer more conventional loans that are typically larger, can run up to 60 months, involve interest and fees, and sometimes do require a credit check—but, as in Furgang’s case, the approval process can be almost as fast and seamless as with a pay-in-four. 

Indeed, speed and convenience are the hallmarks of all buy now, pay later loans, which are now offered as part of the standard checkout and payment process by countless online and in-person retail and service providers. More than 95 million Americans took out a BNPL loan in 2023—37 percent of adults, according to a February 2024 report by business data firm PYMNTS Intelligence.

Travel has been one of the industry’s fastest-growing areas in recent years. Some of the biggest BNPL companies, including Affirm, Afterpay, Klarna, and Uplift, have expanded into loans for flights, hotels, cruises, car rentals, and vacation packages, and nearly every major airline, hotel operator, and online booking site now offers at least one buy now, pay later option as part of their online payment process. 

The consumer benefits of buy now, pay later can mostly be summed up in the phrase “access to credit.” Whether or not they require a credit check, BNPL loans are often used by those who have tapped out their credit cards and other credit options, have poor credit histories, or have no credit history at all. They can be a financial lifeline for anyone lacking the cash to cover urgent spending needs, including travel expenses. That’s why Kimberly Pfeiffer, owner of Bae Moon Travel in Wichita, Kan., says she recently partnered with Uplift to offer BNPL financing to her clients. “Sometimes travel is unexpected,” she says. “Perhaps there’s a death in the family, or someone is sick and in the hospital, and the client just doesn’t have the funds” to get where they need to be.

In addition, if consumers use them carefully and selectively, buy now, pay later loans can sometimes fulfill their advertised promise of charging no fees and no or low interest.

Still, the risks may outweigh the benefits, as CR has noted in a previous article and report. 

For example, some consumers believe they’re signing up for a no-fee, no-interest loan but end up agreeing to a loan with both. Others are drawn in by an advertised interest rate but are offered a higher one after they apply. Furgang, for example, says she was initially offered a rate of 19.99 percent but ended up borrowing at 30 percent. 

Uplift did not respond to CR’s questions about how the company handles situations like the one Furgang faced.

Still, other consumers take on multiple buy now, pay later loans, do a poor job of juggling all the payment schedules, and end up getting hit by late fees and/or damaging their credit score. “The more loans a person has, the more likely they’ll be late paying on at least one of them,” says CR’s Bell.

And some consumers, seemingly lured by big-dollar offers of easy credit, simply spend more than they intend or can afford to pay back, especially when interest is added in. In fact, Affirm tells prospective merchant partners that customers who use BNPL loans to book travel spend an average of 48 percent more than other customers; Uplift says its customers spend an average of 22 percent more.