USA TODAY International Edition

Airlines, hotels dangling buy- now, pay- later offers

It can be appealing, but keep an eye on costs

- Dawn Gilbertson

Travel companies are jumping on this trend, but is it a good idea to book your tickets?

Several months into the pandemic last year, Zachary Sempek and his new wife were desperatel­y craving a vacation.

Their wedding had been reschedule­d multiple times, the honeymoon scuttled by Hawaii travel restrictio­ns. And they were still grieving the death of her father in late 2019 from cancer.

“We felt we sort of deserved a week off to relax,” the 29- year- old insurance claims worker said.

Money was tight, and they didn’t want to dip into wedding cash earmarked for Hawaii or put the $ 1,500 vacation package to San Francisco on a credit card. So when Southwest Vacations offered the option of a monthly payment plan during online checkout – something Sempek had only seen for retail purchases – they jumped on it, high interest rate and all.

“Having everything just simplified into one low payment worked,” Sempek said.

Buy now, pay later plans, a hightech twist on layaway plans except buyers get the goods ( or vacation) upfront instead of when paid off, have exploded in popularity for online shoppers buying everything from clothes to pricey exercise equipment such as a Peloton bike.

March spending via payment programs from Affirm, Afterpay, Uplift, Klarna and others grew 166% over the same period in 2020, and year- to- date growth is tracking at the same rate, according to new statistics released last week by Adobe Analytics.

The percentage of online transactio­ns using buy now, pay later plans in North America is projected to grow from 0.9% in 2020 to 3% in 2023, according to Uplift, citing a Worldpay Retail Global Payments Report.

Travel is seen as a big growth area, though, unlike many retail buy now, pay later programs, travelers typically pay interest on the purchase and make payments for a longer term.

Expedia, Priceline, Hotels. com and several airlines, including United, Alaska, Air Can

“Having everything just simplified into one low payment worked.” Zachary Sempek

ada, Allegiant and Spirit, already offer the option. So do several airlines’ independen­tly operated vacation package arms, including Delta Vacations and United Vacations. Cruise lines are in the game, too, with Carnival, Norwegian and Royal Caribbean among those offering the option.

And two key players joined the list this spring.

In April, Southwest Airlines, the nation’s largest domestic carrier, began offering a buy now, pay later option for flights through Uplift. Southwest Vacations, which is operated by another company, has offered Uplift financing since 2017, and now accounts for more than 10% of the vacation site’s eligible bookings, according to Uplift CEO Brian Barth.

Southwest began studying whether to add a financing option for travelers shopping for tickets on its website before the coronaviru­s pandemic began. Then came the online shopping boom as the country went into lockdown, with some buyers’ budgets stretched thin by the economic fallout from the coronaviru­s crisis.

“During the pandemic, the appeal of installmen­ts and the use of installmen­t products really took off,” said Jonathan Clarkson, the airline’s managing director of loyalty, partnershi­ps and products.

The appeal of a buy now, pay later option for Southwest: more ticket sales.

“For us it’s really just about broadening ( payment) options and booking those flights that maybe we wouldn’t have booked because they were too expensive to pay for at once for somebody,” Clarkson said.

Vacation rental company Vrbo, which is owned by Expedia, also just added a buy now, pay later option via Affirm. Affirm is an industry leader created in 2012 by the co- founder of PayPal.

“This benefit enables families to plan and book future vacations now and pay for them later,” Mike Sutter, Vrbo’s vice president of product management, said in a statement when the new payment option was announced in late March.

The buy now, pay later pitch to travelers

For those itching to get away, the pitches for the latest buy now, pay later programs are enticing.

“Explore the world now. Pay over time.”

“Book your dream trip now. Pay later.”

“Upgrade to the rental car you want. Just $ 47.07 per month.”

Uplift CEO Brian Barth says the payment plans are a “travel enabler.”

“We felt like we want to help people create the best experience­s of their lives, have the memories,” he said.

The company also pitches payment plans as a way for travelers to take advantage of fare sales and other promotions aimed at early bookers.

“Unlike financing other things in your life, the key to travel is you need to be able to buy when prices are good,” he said. “You could pay two times or more if you don’t book early.”

Even with interest charges built into the monthly payments, Barth calls it an attractive propositio­n, a vacation credit line with a defined payback plan.

“If you do the math on it, it’s not very much money to have a year to pay for it,” he said.

How do buy now, pay later plans work for vacation bookings?

Travelers seeking to spread out payments for a vacation will see the option during online checkout.

On Southwest, the payment options are credit/ debit card, PayPal or Uplift financing.

Carnival Cruise Line gives travelers four choices on its website, including financing through Uplift.

Clicking buy now, pay later when paying for a trip is basically taking out a vacation loan, albeit one with an answer in seconds.

The websites flash an estimated monthly payment, including interest where applicable, for the trip. But those are sample rates. Southwest’s website quoted monthly payments starting at $ 178.49 for 11 months via Uplift instead of one payment of $ 1,824 for four roundtrip tickets from Chicago to Orlando, Florida, in late July. That was based on an interest rate of 14.99%. The total price with financing: $ 1,963, or $ 139 extra.

Actual terms are dependent on travelers’ credit and the length of the loan. Interest rates for trip financing start at 7% for Uplift and 10% for Affirm and go as high as 36%, the companies say, though some travel companies occasional­ly offer 0% financing to qualified buyers. ( The loans are not available in select states because of local regulation­s.)

Repayment terms and other terms vary. Southwest offers six- and 11month payment plans and has a minimum purchase of $ 100. Vrbo renters can pick from payment plans of three months to 18 months depending on the total price of the rental. Budget carrier Allegiant Air, which also sells vacation packages, has an $ 800 minimum, Southwest Vacations, $ 500.

Affirm and Uplift do what they call a “soft” credit check to determine eligibilit­y for financing and the interest rate and say applying doesn’t affect credit scores.

For a hypothetic­al cruise purchase via Uplift on Carnival last week, I was asked for the last four digits of my Social Security number, annual income and address, among other personal informatio­n.

Is it smart to take out a vacation loan?

Monthly payments are definitely easier on the budget than a lump sum, at least in the short term, but is it wise for travelers to finance a vacation?

Mike Sullivan helps people get out of debt at the nonprofit credit counseling and debt management firm Take Charge America.

He doesn’t see using services such as

Affirm and Uplift for a vacation as any different than putting a trip on a credit card.

“These are just virtual credit cards,” he said. “You can call it what you want. It’s credit. You’re using credit, and there will be costs, there will be effects.”

He said he is not opposed to buy now, pay later vacations but said travelers need to zero in on the total cost of the trip when weighing payment options.

The best buy now, pay later option, and one that trumps using a credit card, he said: 0% interest offers.

Those aren’t prevalent in travel as they are in retail, but there are occasional offers. Vrbo offered free financing for a few weeks when it introduced payments through Affirm. Carnival, vacation rental site Vacasa and the all- inclusive resort chains Secrets and Dreams are among those currently offering zero- percent financing to qualified buyers.

Whatever the interest rate, Sullivan said consumers need to make sure they don’t book a bigger trip than they can afford on credit, no matter how much they need a mental health break after not traveling for more than a year.

“There’s a temptation to do things, perhaps, that you wouldn’t otherwise do,” he said. “So I’d be careful about that.”

A splurge on an overwater bungalow in Tahiti might not seem worth it months after the trip when the loan payments are still being deducted from a checking account.

Uplift’s Barth said the company’s travel financing plans are not designed to encourage impulse purchases.

“Nobody wants to get people into ( financial) trouble because you’re not going to get paid back,” he said.

What happens when you have a travel loan and plans change?

Chuck Bell, programs director in Consumer Reports’ advocacy division has reviewed complaints filed against buy now, pay later providers with the Better Business Bureau and Consumer Financial Protection Bureau.

One trend that popped out: Consumers often aren’t aware they are no longer just dealing with a travel company if issues arise.

“That’s the thing I think is confusing: they don’t necessaril­y understand by electing to get this loan, now you’ve invited a third- party financing arm in between you and United Airlines or whoever you’re doing business with,” he said.

That’s not a problem if everything goes well with the trip.

But travel is an area where things don’t always go according to plan, especially during a global pandemic that led to an unpreceden­ted plunge in travel and a surge in refunds and travel credits. Cruise lines still haven’t resumed sailing in U. S. waters.

“If you’ve ever experience­d travel disruption or distress, you know that you might be on the phone a long time just with the airline or just with the hotel,” Bell said. “Do you really want to have two times that experience?”

Sempek and his wife, Abbie, ended up having to cancel their mid- December mini- moon to San Francisco because of increased travel restrictio­ns in California ahead of the holidays.

He called Southwest Vacations multiple times and was endlessly on hold. When he finally got through to customer service representa­tives and, later, a supervisor, he was told he was not eligible for a full refund because he didn’t buy the travel insurance.

So he only got about half of his money back in the form of Southwest Vacation travel credits. He still has 19 payments of $ 80 remaining with Uplift and never left Nebraska.

Sempek doesn’t blame the middleman but says the experience taught him not to go into debt for a vacation.

“Going forward, if I can’t afford it, then I don’t need it,” he said.

‘ I would never do it again’

One thing travelers who financed trips often don’t realize, Bell said: They might still owe money on the loan even after a full refund from the travel company.

“The consumer is still on the hook for paying the interest on the loan,” he said. “People don’t really think that would be fair, even though that would be happening if they pay for it with a credit card.”

Robert Owens and his husband were booking a Carnival cruise to Mexico early last year when they noticed the option to pay over time.

Rather than pay $ 1,370 upfront for the five- night cruise to Mexico, they could pay for it in 18 monthly installmen­ts of $ 95, or a total of $ 1,710.

The young couple had already purchased an iPad and clothes using the buy now, pay later option because it’s more palatable for their budget.

The May 2020 cruise, to celebrate their birthdays, was canceled. When they received word of a refund several weeks later, it was $ 300 short of the amount they were expecting.

“They told us it was the finance charge, and they were not giving it back to us,” the 30- year- old said.

Owens works in social media and customer service and said he was particular­ly peeved at what he saw as a lack of empathy from Uplift representa­tives.

“It was like, ‘ This is what’s going on and this is what you’re going to deal with and you’re going to like it,’ ” he said.

He said his mother was thinking of financing an upcoming cruise with his grandmothe­r, and he talked her out of it.

“I would never do it again,” he said.

Tips for financing a vacation through buy now, pay later programs

● Zero in on the interest rate and compare it with other options, including credit cards.

● Look for 0% financing. Vrbo offered it until April 11. Carnival, Allegiant and some resorts and vacation package operators still offer 0% on some purchases to eligible buyers.

● See if the company has any other options, with no interest charges. Carnival, for example, offers an “Easy Pay” program with a small down payment and four monthly installmen­ts for cruises booked at least five months in advance.

 ?? PROVIDED BY THE SEMPEKS ?? Zachary and Abbie Sempek at their wedding in July 2020.
PROVIDED BY THE SEMPEKS Zachary and Abbie Sempek at their wedding in July 2020.
 ?? ILLUSTRATI­ON BY COLIN SMITH/ USA TODAY NETWORK, AND GETTY IMAGES ??
ILLUSTRATI­ON BY COLIN SMITH/ USA TODAY NETWORK, AND GETTY IMAGES
 ?? PROVIDED BY ROBERT OWENS ?? Robert Owens, right, and his husband, Vincent, on their last vacation.
PROVIDED BY ROBERT OWENS Robert Owens, right, and his husband, Vincent, on their last vacation.

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