Holidaymakers are being urged to exercise caution when using Buy Now Pay Later (BNPL) schemes to fund their travels, as these payment methods can leave consumers exposed to significant financial risk and stress.
The Rise of BNPL in Travel
The travel industry is increasingly embracing these payment options. Hotel chain Travelodge, which operates several sites in Birmingham, recently introduced a new payment scheme featuring providers like Klarna, Clearpay, and PayPal.
This move follows a similar initiative by Airbnb, which partnered with Klarna in late 2023. This agreement allows UK guests to spread the cost of their stays over several weeks or months for reservations priced between £35 and £4,000.
Understanding the Consumer Risks
While the allure of spreading costs is strong, experts highlight critical drawbacks. Matthew Sheeran from the debt solutions platform Money Wellness explains, “While it can be really convenient, it’s worth remembering that it doesn’t come with the same protections as a credit card.”
He elaborates that if a problem arises with a booking, “you’ll usually have to chase the retailer or travel provider yourself, which can be stressful and time-consuming.” He advises checking if the BNPL provider has a dispute process, but notes these are not as robust as the legal protection offered by Section 75 of the Consumer Credit Act on credit card purchases.
Refund Complications and the Illusion of Being Risk-Free
Maisie Blewitt from the online marketplace Transfer Travel points out another pitfall. “Refunds can be messy, too, because if a trip is cancelled, instalments can keep coming out of your account until the refund clears, which could take weeks.”
She strongly advises travellers to “carefully read and fully understand the small print” before committing to a BNPL holiday.
The psychological effect of these services is also a concern. Sebrina McCullough, also from Money Wellness, states, “It feels risk-free, and that’s the problem. Interest-free offers make it feel like a payment method, not borrowing. But it’s still credit, and if you use it to fund what you can’t afford, the risks grow.”
In response to the growing market and associated risks, the UK’s financial watchdog, the Financial Conduct Authority, is set to begin regulating the BNPL sector from July 2026.
