Are Buy Now, Pay Later Services Worth the Risk for Summer Travel?

This summer, as people gear up to travel, many are turning to alternative payment options to fund their vacations. However, these choices come with their own set of challenges. Here to share insights on this topic is Nicholas Braiden, a leading FinTech expert renowned for his work in blockchain and advising startups on financial technology.

Can you tell us more about the findings of the 2025 Summer Travel Report by NerdWallet?

The 2025 Summer Travel Report by NerdWallet reveals some intriguing trends. One of the key takeaways is the high number of travelers opting to use buy now, pay later (BNPL) services. These services allow people to split their vacation costs into smaller, more manageable payments. The report also highlighted that many travelers are still paying off debts from previous trips, showing the possible long-term financial impact of financing travel through such means. The data was gathered through a survey conducted by The Harris Poll, which asked over 2,000 US adults about their summer travel plans and how they intend to pay for them.

Nearly one in five summer travelers plan to use buy now, pay later services. What are some potential risks associated with using these services for travel expenses?

While BNPL services like Afterpay, Klarna, and Affirm offer enticing options to spread the cost of travel, they come with significant risks. One primary concern is that these services can lead to accumulating debt if payments are not managed effectively. Since they do not always charge interest immediately, it might seem like a low-risk option. However, missing a payment can result in fees and exacerbate financial stress. Financial experts are particularly worried about the potential for consumers to overextend themselves, especially when juggling multiple BNPL plans simultaneously.

The Consumer Financial Protection Bureau found that 63% of buy now, pay later borrowers took out multiple loans at once in 2022. Why is this problematic?

Taking out multiple BNPL loans at once can be very problematic. It significantly complicates a borrower’s financial situation, as having several payment plans can be challenging to manage. This juggling act leads to increased monthly financial obligations, and missing payments can result in fees and negatively affect credit scores. For many, this creates a cycle of debt that can be hard to break, with each missed payment contributing to a growing financial burden.

The survey mentioned that 30% of Americans who put last summer’s trip on a credit card still haven’t paid off the balances. What advice do you have for individuals in this situation?

For those still grappling with travel-related credit card debt, finding a way out is essential. One effective strategy is to prioritize these debts by tackling the highest interest rate balances first, often referred to as the avalanche method. Additionally, cutting back on non-essential expenses to allocate more funds toward debt repayment can help. Consolidating debt with a lower-interest loan might also be beneficial. Importantly, setting up a payment plan and sticking to it can prevent the accumulation of additional interest and charges.

For Gen Z adults, the rate of carrying debt from 2024 vacations was even higher at 45%. Why do you think this age group is particularly affected?

Gen Z appears to be particularly affected by lingering travel debt due to a combination of factors. This age group often has less financial experience and may not fully understand the long-term implications of accruing debt. They might also have less stable income, making it harder to pay off debts promptly. Furthermore, the desire for immediate gratification and experiences can lead them to make impulsive financial decisions, including using credit to fund travel.

How do interest charges or repayment plans potentially negate the value of rewards earned on credit cards?

Interest charges and repayment plans can quickly negate any rewards earned on credit cards. While rewards points or miles might seem appealing, the benefits they provide can be easily outweighed by high-interest charges if the credit card balance isn’t paid off in full each month. For instance, if you rack up significant interest over several months, the cost can surpass the value of the rewards you earned, effectively nullifying the financial advantage of those rewards.

Although many travelers use buy now, pay later services, credit cards remain the most common way to pay for travel. What makes credit cards a preferred option?

Credit cards are often preferred for travel expenses due to several advantages they offer. Firstly, they provide a level of fraud protection, which is crucial when making online transactions or traveling. Many credit cards also offer travel-related rewards such as points, miles, or cash back, which can be very appealing. Moreover, credit cards come with added perks like travel insurance, purchase protection, and no foreign transaction fees, making them a versatile tool for travelers. However, it’s crucial to use them responsibly to avoid accruing high-interest debt.

The report found that 91% of travelers plan to take steps to save money on their trips. What are some practical ways they can achieve this?

Travelers can save money in several practical ways. First, opting for budget accommodations or staying with family and friends can significantly reduce lodging costs. Using travel points and miles accumulated from credit card rewards can also offset expenses. Additionally, travelers can save by booking flights and accommodations in advance or during sales, and by being flexible with their travel dates. Pack some meals or choose affordable dining options to cut down on food costs.

Do you have any advice for our readers?

My advice would be to plan your travel finances as meticulously as you plan your trip. Always create a realistic budget that includes all possible expenses, and have a clear repayment plan if you’re using credit or BNPL services. Remember, the joy of the trip will quickly fade if you’re left with financial stress long after returning home. Prioritizing financial health will allow you to truly enjoy your vacations and embark on future travels without worry.

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