Buy Now, Pay Later Travel: What You Need to Know


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Summer is in full swing and many countries are relaxing travel restrictions, so you might want to plan a trip after the pandemic. Even if you’ve managed to save money ahead of time, travel expenses can quickly escalate and you might be tempted to opt for the buy now, pay later option offered at checkout on many travel sites, including Carnival or Expedia.

These point-of-sale loans are tempting for consumers who do not want to pay their vacation after the pandemic in a lump sum, allowing people to make payments over a fixed period of time, sometimes without high interest rates.

But is using the buy now, pay later option to pay for flights or hotel stays too good to be true?

Select explores some of the advantages and disadvantages of using buy now, pay later for travel.

What are Point of Sale Loans?

How do POS loans work?

When you buy a flight or item, you are given various financing options at checkout, such as the option to pay by credit card, gift card or point of sale credit… You will be redirected to the POS terminal provider’s website where you can enter your personal information.

Some companies do not conduct credit checks, while others do either soft or hard loan request… Soft credit checks do not negatively affect your credit ratingbut complex queries will temporarily lower your score. Depending on the information you enter, you will be either approved or denied a loan.

Afterpay does not perform any credit checks until Klarna makes soft and hard credit checks, depending on the loan.

IN affects your credit score depends on whether the provider reports your payment history credit bureaus… For example, Affirm only tells Experian about your credit history for some loans, not others. For loans that Confirm informs At Experian, your payment history, the length of your credit history with Affirm, your loan amount and late payments can all be displayed on your credit report.

Be sure to check the terms of your POS loan to see if your history of negative payments is reported to the credit bureaus.

Should you use travel loans?

Traveling can seem like a great opportunity to use a POS loan because it is often a large purchase that you may not have the cash to pay.

Klarna, Afterpay, Affirm and Uplift offer “buy now, pay later” options for selected travel partners. Confirm has partnerships with Delta Vacations, Priceline, StubHub and Alternative Airlines, a flight booking website. Uplift specializes exclusively in POS travel loans, about 200 travel partnersincluding United Airlines, Kayak, Southwest Airlines and Royal Caribbean.

Uplift will help you cover transactions between $ 100 and $ 25,000. Interest rates range from 7% to 30%, according to Tom Botts, Uplift’s commercial director, but there are several travel partners such as Carnival Cruise Line and Atlantis that have 0% annual interest rates. The average annual interest rate on a loan for Uplift points of sale is 15%, which is similar to the interest rate. average annual interest rate on credit cards

“We use a variety of factors to determine eligibility,” Botts says. “Interest rates depend on a number of factors, including credit history, the amount of the transaction, and the time it takes to travel.”

Uplift also only performs soft credit checks, which will not negatively impact your credit rating.

If you can get a loan at 0% per annum and make payments on time, a point of sale loan can be a good choice to finance your trip. But if those monthly payments don’t fit into your budget, be wary of a POS loan and read the fine print ahead of time to determine how much you’ll end up paying in interest.

For example, if you use Confirmation to fund purchases on Alternative airlinesYou can only get a 0% APR on a point of sale loan if you buy a flight that costs less than $ 500. If your ticket is worth more than 500 dollarsYou can get an interest rate of up to 30%, depending on your creditworthiness.

If you spend $ 1000 per flight and choosing a 12-month payment plan with confirmation, you’ll have to almost fork out USD 100 in interest if you have 20% per annum on the loan. One of the benefits of using Affirm instead of a credit card is that you have a longer payment period (3, 6, 12, or 18 months), which helps spread expenses over time into more manageable payments. And with an installment loan from Confirm or Uplift, the interest rate does not add up from month to month, so your payment remains the same throughout the loan term.

But the big downside to using point-of-sale loans for travel is the need to deal with unexpected issues like trip cancellations or delays, says Priya Malani, CEO and founder of Stash Wealth.

“If a trip is canceled or delayed due to unexpected fees, your loan is still payable. You are on the hook to get the agreed amount. Even if you checked out in one smooth process, you still work with two separate organizations – a travel service provider and a POS loan provider, ”says Malani.

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

Travel rewards credit cards offer higher reward rates for money spent on travel, and points earned can be used to book flights or hotels. While tourist credit cards usually come with an annual commission, some offer an introductory period of 0% so you don’t have to worry about high interest rates for 12 months or longer. If you choose the 0% APR path, make sure you set up a repayment plan and pay at least every month so you don’t have to pay late fees or high interest rates.

IN Chase Sapphire Preferred® Card currently offers biggest bonus ever: New cardholders can earn 100,000 points after spending $ 4,000 on purchases within the first three months of opening an account. Points can be redeemed for a ride worth $ 1,250 if you book through the Chase Ultimate Rewards® portal.

Chase Sapphire Preferred® Card

  • Awards

    5X points on Lyft rides through March 2022, 2X points on travel and meals worldwide, 1X points on all other purchases

  • Welcome Bonus

    Earn 100,000 bonus points by spending $ 4,000 on purchases in the first 3 months of opening an account

  • Annual fee

  • April introduction

  • Regular annual interest rate

    Variable from 15.99% to 22.99% for purchases and balance transfers

  • Balance transfer fee

    Either $ 5 or 5% of the amount of each transfer, whichever is greater

  • Foreign transaction fee

  • Credit required

IN Capital One Venture Rewards Credit Card is also a good choice, but it has a smaller welcome bonus and a higher reward rate than Preferred, giving 2X miles per dollar per purchase and a 60,000 points welcome bonus if you spend $ 3,000 within three months of opening an account.

Capital One Venture Rewards Credit Card

Capital One Venture Rewards credit card information was self-collected by Select and has not been verified or provided by the card issuer prior to publication.

  • Awards

    5X miles for hotel and rental cars booked through Capital One Travel℠, 2X miles per dollar for every second purchase

  • Welcome Bonus

    Earn 60,000 bonus miles by spending $ 3,000 on purchases within the first 3 months of opening your account.

  • Annual fee

  • April introduction

    Not applicable for purchases and balance transfers

  • Regular annual interest rate

    Variable from 17.24% to 24.49% for purchases and balance transfers

  • Balance transfer fee

    3% for promotional offers per annum; no for balances translated at regular annual interest rate

  • Foreign transaction fee

  • Credit required

Travel cards also often have additional benefits such as car rental insurance, trip cancellation insurance, and purchase protection. You will not receive any of these benefits if you use a travel POS loan.

If you are worried about high credit card charges or are only eligible for a POS loan with a high annual interest rate, you should also consider setting up a road fund.

Keeping your money in high yield savings account, you will earn more (thanks to compound interest) what would you be if you deposit money into a checking account or a traditional savings account. Setting up a separate travel fund can also give you a monetary goal to strive for, and setting up automatic monthly transfers can help you avoid spending money on other short-term, more frivolous purchases.

Bottom line

POS loans are attractive because they are easy to use – you simply provide some basic information about yourself to the loan provider before you are discharged, and you can instantly get a loan that will allow you to spread the cost of your trip after a few months. However, if you’re not careful about reading the fine print, you may have many caveats when using the buy now, pay later option, including high interest rates and late fees.

Capital One Venture Rewards credit card information has been independently collected
Select and has not been reviewed or submitted by the card issuer prior to publication.

Editorial note: The opinions, analyzes, reviews or recommendations expressed in this article are solely owned by the Select editors and have not been reviewed, endorsed or otherwise endorsed by any third party.

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