Travelers Are Booking Dream Vacations On Installment Payment Plans, But There's One Big Downside

If it feels like Gen Z is traveling more than past generations, it's because they are. Over 50% of young adult travelers take at least three trips per year and spend an average of $11,766 yearly on travel alone, according to a study from Travel Perk. Half of Gen Z travelers are spending less on things like accommodations and food, but they're also shifting their attention to experiences and the next big travel trends like "noctourism," which involves deciding and planning a trip based on nighttime excursions or activities. Millennials are still traveling a lot, too. Vacations are shifting to the top of the list of priorities for these two demographics despite the increase in costs in other areas of life. How can they afford it? Buy now, pay later options.

Travel is an expensive thing, yet buy now, pay later services make it feel cheaper by splitting one big cost into several smaller ones. Take a $1,500 plane ticket. It feels and looks costly, but 15 payments of $100 seem more manageable. In the end, the entire cost of the vacation still needs to be spent; it'll just be done much, much later. 

One big downside of using buy now, pay later services to pay for a trip in installments is that the total amount due could increase because of hidden fees. These additional charges may be incurred in specific situations, though they often are when a due payment fails to be processed. Some services will also offer longer-term plans that make the monthly payment even lower. The catch? Special interest or service fees are added to the total amount due. 

The latest statistics show that 18% of users miss payments, with the main reason being growing debt. As a result, those who spend on travel continue to pay for a trip well after they're returned home. It's not inconceivable that some travelers may even be paying for a previous vacation while planning an upcoming one, and probably leaving out the biggest expense of most vacations out of their budget, too. 

Until now, the vast majority of buy now, pay later companies didn't report loans to credit bureaus. In other words, whether users paid off their purchases on time or late didn't affect their credit scores. This may be changing, however. The Fair Isaac Corporation recently announced FICO Score 10 BNPL and FICO Score 10 T BNPL, the first credit scores that include buy now, pay later data. Scheduled to launch in fall 2025, this new way of calculating credit scores may influence other score providers to follow suit. 

Avoid the pitfalls of buy now, pay later plans by budgeting your vacation as a single big purchase instead of lower upfront costs and leaving the rest for later. You can also adjust your travel expectations by switching up your destinations. If you're looking for some sun, ditch the beaches of Monaco, opt for these gorgeous islands for vacationing that won't break the bank.