How to use “Travel now, pay later” services when planning a trip

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After more than a year of staying close to home, travelers are once again ready to budget for a vacation. But if the desire to travel is overwhelming your finances, a growing number of “travel now, pay later” services are making an immediate vacation possible.

“Services like Klarna and Afterpay give us the option of affording this very nice hotel or staying on vacation that day by staggering the payments and dividing them into quarters rather than requiring an upfront payment,” says Michelle. Halpern, founder of the travel blog Live Like It’s the Weekend.

Here’s how it works: If you find a trip, flight, or hotel and see the Klarna or Afterpay option, you can undergo a 30-second credit check, through apps or online, to determine how much you have the right to pay. installments. You make the first payment, which is a quarter of the total purchase amount, and immediately receive confirmation of your trip or flight. The service charges the remaining interest-free installments of the total every two weeks directly from your preferred payment method until the total is paid. You complete the transaction instantly, there is no impact on your credit score and there are no fees. However, using these services does not help create credit and their charges are initiated automatically, which means that even if your linked bank account becomes weak or your credit card is close to its limit, these charges will continue. to occur.

“Afterpay has saved my life on several occasions,” says Shawn Richards, a UK-based expedition coordinator for Ultimate Kilimanjaro, who has spent years as a nomad. Richards remembers times when he spontaneously decided to move to a new place, but did not have the funds available. “Afterpay was like having a virtual dad because it gave me the boost I needed; I had to find a job in my destination very quickly to be able to pay for how I got there, ”he says. Four years ago, Richards used Afterpay to mark the unlimited $ 1,400 theft to Tanzania that got him to work with his current travel agency.

The idea is catching on quickly: Afterpay reported that it had registered over 13 million users in North America as of January 2021. Different retailers have partnerships with different payment systems, so you might need accounts with from multiple service providers to create the trip you want. . For example, Airbnb offers payment through Zip (formerly Quadpay), while you can pay for travel on Booking.com and Expedia through Klarna. Here are some other things to consider.

Should I go on a more expensive trip?

While these services can be a great way to avoid credit card debt and the interest that can arise from it, finance professionals caution against spending more than your budget allows.

“Just because you have more time to spend your money doesn’t mean you have more money to spend,” says Tony Palazzo, CFA and Managing Partner at Berkeley Capital Partners & Access Private Capital in Atlanta, who notes that Paying in four services can lessen the psychological impact of a purchase, but that doesn’t mean you’re paying less. “You must be asking yourself, ‘If I can’t afford it now, how am I going to afford it in a timeframe? [six]-week ?’ He said.

Palazzo is currently seeing its financial services clients planning to take bigger trips, either because they didn’t spend money on travel during the pandemic or because they are rewarding themselves for a tough 2020. seems to be a popular target, ”he said.

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