Should You Pay for Travel With a 'Buy Now, Pay Later' Plan?

When it comes to paying for travel, you now have more options to explore.

Consumers are more than familiar with the concept of buying things and paying for them over time. It's called swiping a credit card and paying off the balance over the course of several months, or even years. But there's a downside to carrying a credit card balance: accruing interest on those charges and spending even more. If only there were a better way.

Actually, there might be. Thanks to the growing availability of "buy now, pay later" plans, or BNPL plans, you can enjoy the flexibility of a credit card without automatically subjecting yourself to interest charges.

How does BNPL work?

BNPL plans let you spread out your payments for a given purchase over a short period of time -- usually up to 12 weeks. As long as you stick to the terms of your installment agreement, you won't accrue interest charges or get stuck with pesky fees.

These days, many retailers (both physical and online) allow customers to pay with BNPL plans. And now, it seems like the option is coming to the travel industry.

Expedia, for example, now allows travelers to pay for their bookings over a series of payments instead of having to pay for an entire trip upfront. It's an option that gives travelers a lot more flexibility -- but is it the right move for you?

A mixed bag

When you make a large purchase, like paying for a flight and hotel, it can be difficult to pay for it all at once. With a BNPL plan, you don't have to. Rather, you can spread that payment out over several months so you're not emptying out your bank account or carrying debt that results in interest.

But one thing you should know is that BNPL plans don't give you that much time to pay off your purchases. Usually, you only get about 12 weeks. And if you don't keep up with your payment schedule, there can be costly penalties and interest to grapple with.

Plus, if you fall behind on your BNPL plan payment schedule, that negative activity could get reported to the credit bureaus. The result? Damage to your credit score that makes it more difficult to borrow affordably the next time around.

Should you use a BNPL plan to cover travel costs?

As a general rule, you should really only take trips you know you can afford to pay for outright. Racking up debt for the sake of traveling is a move you might regret. However, if you have the money to cover a trip but want a little leeway paying for it to avoid feeling stressed about your cash flow, then using a BNPL plan to pay for travel isn't a bad idea.

Say you've saved $3,000 to cover a trip to Europe, and that money is already sitting in your savings account. If the idea of forking over all of that cash at once is unsettling, then you may want to spread out those payments over three months -- and that's fine.

What’s more, say you need $3,000 to cover your trip and have saved $2,500 thus far. If you're confident you'll be able to save the remaining $500 within a couple of months, you may want to sign up for a BNPL plan. That way, by the time that final $500 comes due, there's a good chance you'll have managed to sock it away.

But if you have no money set aside for a trip, then a BNPL plan won't be very helpful. In that situation, you're better off postponing your trip until you've saved enough to cover its cost. And if it's an emergency -- say, you've traveling to visit a sick relative or friend -- then you may be better off using a travel credit card, even if it means racking up interest on your flight and hotel.