The Hidden Costs of ‘Stay Now, Pay Later’: Why Your Holiday Could Be Riskier Than You Think
Google searches for “buy now pay later flights” and “buy now pay later hotels” have surged this year, tempting travellers with the promise of spreading the cost of their getaways. But this convenience comes at a price – a potential loss of vital consumer protections that could leave you significantly out of pocket if something goes wrong. While the allure of ‘budget now, travel later’ is strong, experts warn that relying on buy now, pay later (BNPL) for holidays is a gamble many aren’t aware they’re taking.
The Rise of BNPL in Travel: A Convenient Illusion?
From Travelodge offering Klarna to Airbnb partnering with Klarna, the travel industry is rapidly embracing BNPL. This allows customers to split payments into instalments, making expensive trips seem more attainable. The appeal is clear: avoid a large upfront cost and manage your budget more easily. However, this flexibility masks a critical difference compared to traditional payment methods.
Credit Card Protections: Section 75 and Why It Matters
When you use a credit card for purchases between £100 and £30,000, Section 75 of the Consumer Credit Act provides powerful protection. If the retailer fails to deliver, or the service is significantly flawed, your credit card provider is jointly liable, meaning you’re likely to get a full refund. Matthew Sheeran from Money Wellness explains, “With BNPL, you’re often left to chase the retailer yourself, a process that can be stressful and time-consuming. Dispute processes, if they exist, aren’t as robust.”
The Risks Beyond Disputes: Insolvency and Cancellations
The lack of these protections extends beyond simple disputes. Maisie Blewitt at Transfer Travel highlights a more serious risk: “If the airline or hotel goes bust, your money could be lost entirely.” Furthermore, refunds can be complicated. If a trip is cancelled, instalments may continue to be deducted until the refund is processed – a delay that could take weeks, leaving you temporarily out of pocket.
BNPL: Not Free Money – Understanding the Hidden Dangers
The “interest-free” nature of many BNPL schemes creates a false sense of security. As Sebrina McCullough from Money Wellness points out, “It feels risk-free, and that’s the problem. It’s still credit, and if you use it to fund what you can’t afford, the risks grow.” Late payment fees can quickly add up, and missed payments can negatively impact your credit score. The ease of access can also encourage overspending, leading to a cycle of debt.
The Regulatory Landscape: What’s Changing in 2026?
Currently, the BNPL sector is largely unregulated. However, that’s set to change. From July 2026, the Financial Conduct Authority (FCA) will regulate BNPL loans, bringing them under the same rules as other forms of credit. This crucial change means BNPL users will finally be covered by Section 75 of the Consumer Credit Act and have access to the Financial Ombudsman Service for complaints. This represents a significant step towards leveling the playing field and protecting consumers.
Future Trends: Embedded Finance and the Evolution of Travel Payments
The integration of BNPL into travel platforms is just the beginning. We’re likely to see a rise in ‘embedded finance’ – where financial services are seamlessly integrated into non-financial platforms. Expect to see more personalized BNPL offers tailored to individual travel preferences and spending habits. Furthermore, the increasing use of AI-powered credit scoring could lead to more nuanced risk assessments, potentially expanding access to BNPL for some while tightening restrictions for others. The key will be transparency and clear communication of the risks involved.
Ultimately, while BNPL offers a convenient way to spread the cost of travel, it’s crucial to understand the potential pitfalls. For larger purchases, the robust protections offered by a credit card remain the safer option. Before you ‘buy now, travel later’, carefully consider whether the convenience is worth the risk. What are your experiences with BNPL for travel? Share your thoughts in the comments below!
