‘Buy now, pay later’ for travel: What you need to know

When he comes planning your next holidayEven if you’ve managed to save some money in advance, travel costs can add up quickly. You may be tempted to choose ‘Buy now, pay later’ Option offered at checkout on many travel websites, including Carnival or Expedia.

These point of sale credits It’s tempting for consumers who don’t want it. pay for their holidays It allows people to make payments over a period of time, without the sometimes high interest rates, in a single lump sum payment.

But he uses ‘Buy now, pay later’ Is the option to pay for your flights or hotel stays too good to be true?

CNBC Election explores some of the advantages and disadvantages of using ‘buy now, pay later’ for travel.

Some of the most popular providers are: post payment, Confirm, Klarna And Rise. Klarna offers point-of-sale credits, some with 0% APR, that allow you to make four payments every two weeks and require a deposit at checkout, while Afterpay lets you pay over six weeks. Afterpay, Uplift, Klarna and Affirm also offer consumers longer payment terms of up to one, two or even three years.

When you purchase a flight or product, you will be presented with different financing options at checkout, such as the opportunity to pay with a credit card, gift card or credit card. point of sale credit. You will be directed to the POS provider website where you can enter your personal information.

Some companies do not perform credit checks, while others are soft or difficult credit inquiry. Soft credit checks won’t negatively impact your credit credit scoreHowever, challenging questions will temporarily lower your score. Your loan will be approved or rejected based on the information you enter.

Afterpay does not perform any credit checks during this period Klarna Performs soft and hard credit checks depending on credit.

the impact of a point of sale on your credit score It depends on whether the provider reports your payment history to the server. credit bureaus. For example, Affirm only reports your credit history to Experian for some loans and not for others. For loans granted Confirm reports To Experian, your payment history, the length of your credit history with Affirm, your loan amount, and late payments may appear on your credit report.

Be sure to read the terms and conditions of your POS loan to see if your negative payment history has been reported to the credit bureaus.

Klarna, Afterpay, Affirm and Uplift all offer ‘buy now, pay later’ for select travel partners. Confirm It has partnerships with Delta Vacations, Priceline, StubHub and flight booking site Alternative Airlines. Uplift is focused solely on providing point-of-sale loans for travel and has approximately 200 travel partnersincluding United Airlines, KayakSouthwest Airlines and Royal Caribbean.

Uplift will help you cover procedures that cost between $100 and $25,000. Interest rates range from 7% to 30%, but there are a few travel partners with 0% APRs, such as Carnival Cruise Line and Atlantis, according to Tom Botts, Uplift’s chief commercial officer. The average APR for an Uplift point-of-sale loan is 15%; which looks like this: average APR for credit cards.

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

Uplift also only performs a soft credit check, which will not negatively impact your credit score.

If you can secure a loan with a 0% annual interest rate and can make your payments on time, a point-of-sale loan can be a good choice for financing a trip. But if these monthly payments don’t easily fit into your budget, be wary of a POS loan and read the fine print beforehand to determine how much interest you’ll pay.

For example, if you use Affirm to finance your purchases Alternative AirlinesIf you purchase a flight costing less than $500, you can only get 0% APR on your point-of-sale credit. If your ticket costs more than 500 dollarsDepending on your creditworthiness, you may be exposed to an interest rate of up to 30%.

if you spend For $1,000 per flight and choose a 12-month payment plan with Affirm, you’ll almost have to cough $100 interest If you have 20% APR on your loan. One of the advantages of using Affirm over a credit card is that you have a longer payment term (3, 6, 12 or 18 months); This helps spread expenses over time into more manageable payments. Moreover, with installment loan Confirm or Increase, interest does not increase from month to month, so your payment remains the same for the life of the loan.

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

“If a trip is canceled or delayed by unexpected fees, your loan is still past due. You’re on the hook for the agreed-upon total amount. Even though you’ve checked out in one streamlined process, you’re still working with two separate credit entities — the travel provider and the POS loan provider,” says Malani.

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

Travel reward credit cards Offer rewards at higher rates for money spent on travel, and the points you earn can be used to book flights or hotels. While travel credit cards often come with an annual fee, some offer a 0% introductory period; so you won’t have to worry about high interest rates kicking in for 12 months or more. If you go the 0% APR route, be sure to set up a repayment plan and pay the minimum amount each month so you don’t have to pay late fees or large interest charges.

Chase Sapphire Preferred® Card is currently offering a welcome bonus offer where new cardholders can earn 60,000 bonus points after $4,000 in purchases within the first 3 months of account opening. This is worth $750 when used through Chase Travel℠. Plus, earn up to $300 in statement credits on Chase Travel purchases during your first year.

Capital One Venture Rewards Credit Card it’s also a solid choice but comes with a smaller welcome bonus and higher reward rate than Preferred; gives 2x miles per dollar on every purchase and a welcome offer of 75,000 miles when you spend $4,000 on purchases within 3 months of account opening; $750 in travel.

Travel cards often come with additional benefits like car rental insurance, trip cancellation insurance, and purchase protection. You cannot benefit from any of these benefits when you use POS credit for travel.

If you’re worried about putting a large charge on your credit card or are only eligible for a POS loan with a high APR, you should also consider building a travel fund instead.

By saving your money in one place high yield savings accountyou will earn more (thanks to compound interest) will be yours if you put your money in a checking account or a traditional savings account. Creating a separate fund for travel can also give you a money goal to strive for, and setting up automatic monthly transfers can help you avoid wasting money on other short-term, more frivolous purchases.

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