More Travelers Are Using Buy Now, Pay Later for Holiday Trips

The holidays are fast approaching, and the time to book holiday flights is even closer. But as travelers securing end-of-year trip reservations begin to reach for their wallets, another payment option is on the table.

A growing list of airlines offers travelers the chance to buy expensive flights now and get an interest-free loan to pay off the purchase in smaller monthly installments. These "buy now, pay later" financing options are available through third-party providers, like Affirm, Uplift, Klarna or PayPal Credit, directly on the airline's checkout page.

Almost 1 in 5 holiday travelers (about 18%) plan to use a buy now, pay later service to pay for their holiday travel expenses, according to a NerdWallet survey conducted by The Harris Poll in September among over 2,000 U.S. adults. For the purposes of the survey, holiday travelers were defined as people who plan to spend money on flights/hotels for 2023 holiday travel.

Buy now, pay later is a way for holiday travelers to finance the $1,947 they plan to spend on holiday flights and hotels this season, according to NerdWallet’s findings. This is an increase of more than 23% from last year’s holiday travel spending ($1,582 on average). That's despite a decline in airfare prices since last year, according to the consumer price index data released in October.

The question is whether using these programs is a good idea.

The rise of buy now, pay later services

Buy now, pay later programs with five major lenders grew 970% from 2019 to 2021, according to a September 2022 report from the Consumer Financial Protection Bureau (CFPB).

The agency also noted the dollar value of loans doled out by those companies rose from $2 billion before the pandemic to a whopping $24.2 billion in 2021. Buy now, pay later usage included everything from beauty products to groceries, gas, pet care and travel.

Experts say the jury is still out on whether buy now, pay later programs benefit consumers. A big reason for the uncertainty is the rapid rise of these financing options.

“There’s a lot we still don’t know about consumer uses of these,” says Michael Collins, an expert in consumer and personal finance at the University of Wisconsin.

According to the CFPB, these loans, paid down monthly by consumers, range in size from $50 to $1,000.

Benefits of using buy now, pay later for travel

There are some benefits to using buy now, pay later for travel.

For one, buy now, pay later can keep travelers from immediately paying for a sizable airfare expense when holiday gifts and other year-end costs can quickly add up.

Plus, there’s a convenience factor to making a buy now, pay later purchase, Collins says.

“You can instantly finance it even if you don’t have cash in the bank and you don’t want to use your credit card,” he says, noting its appeal to those who might not have stellar credit or who don't have a credit card.

Unlike a credit card, though, many of these programs don’t charge interest if you make the minimum monthly payment.

Drawbacks of using buy now, pay later for travel

Buy now, pay later programs do carry risks, especially if you miss your monthly payment.

In the CFPB’s report on Buy Now, Pay Later trends, the explosion in popularity of these financing options last year is discussed, and users are cautioned about the risks of data harvesting, inconsistent consumer protections, minimal dispute resolution options and the potential to accumulate debt and late fees.

“We will be working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a Buy Now, Pay Later loan,” the bureau’s director, Rohit Chopra, said in the report.

The agency also found that 10.5% of buy now, pay later borrowers were charged at least one late fee in 2021.

Use credit responsibly

Ultimately, Collins says, consumers considering taking advantage of one of these programs — or incurring any other debt, for that matter, should consider the basic principles of responsible credit.

“You should be your own best judge of what you can handle,” he says. “You have to take out these loans with the intent to pay them back in a timely way, or else they will get very expensive very fast.”

Survey Method:

The 2023 survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from September 5-7, 2023, among 2,057 U.S. adults ages 18 and older, among whom 967 plan to spend money on flights/hotel stays this upcoming holiday season. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.7 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact [email protected].