How Does Gen Z Travel So Much? Payment Plans
Travelers are increasingly dependent on buy-now-pay-later lenders to make trips happen. Is wanderlust worth the debt and added interest?
As an exercise in financial literacy, my mom had me compare the prices of cell phone plans when I was in fifth grade. Only after reading through Verizon Wireless’s selection and understanding the commitment and expenses that came with my pick was I then allowed to get my prized LG Keybo.
That was the extent of my knowledge on payment plans, until a decade later, when a friend showed me a picture of an Urban Outfitters sweater and asked if she should buy it. “It’s $60, but if I use Afterpay, it’ll only be $15 right now,” she said. I realized then that payment plans were no longer reserved for expensive essentials, like a car or a smartphone. Payment plans have now wormed their way into the retail world, food delivery, and even experiences—60 percent of Coachella festival goers used a payment plan to attend this year.
Visit pretty much any other major music festival website—Roots Picnic, Rolling Loud, and All Things Go, to name a few—and you’ll find they accept (and almost encourage) payment plans. It doesn’t stop at concerts; financial services like Klarna, Affirm, and Paypal have also started advertising payment plans as a way to pay for travel. Klarna even has its own partnership with Expedia.
The most popular form of payment plan is called Buy Now, Pay Later (BNPL). The method requires the customer to pay 25 percent of the purchase up front, with the remaining balance paid off in three more installments. Depending on a person’s financial situation, this system could come in handy and allow people to travel or attend events they would otherwise have to skip. But plenty of customers also end up missing payments, which can lead to financial trouble.
“It can get easy to get carried away. With great power comes great responsibility.”
Paypal’s BNPL plan worked well for Najee Mcfarland-Drye, a 29-year-old customer support specialist at financing company ChargeAfter, who had to book an expensive round trip to Portland, Oregon.
“I didn’t want to drop the full price [immediately],” says Mcfarland-Drye. By paying in installments, “I still got to do the fun stuff I wanted to do in the time beforehand instead of the normal ‘Oh, I spent $800 and now I have to lay low for a minute.’”
In theory, risk is low with the BNPL method. Many of the companies that offer these payment plans advertise themselves as “interest-free,” meaning if everything’s paid on time, there are no additional fees. You pay the same total amount in more manageable chunks, and you still get to go on that once-in-a-lifetime trip or see Beyoncé in concert.
“If you know how to use the system to your benefit, then [payment plans] are great, especially with concert tickets,” says Nia Wright, a barista at Loveless Coffees in Brooklyn who has used BNPL plans to see artists like Childish Gambino, SZA, and Kendrick Lamar. “But I’d recommend it only if you’re financially responsible. It can get easy to get carried away. With great power comes great responsibility.”
If you do miss a payment, the dominos begin to fall: fees accrue, you end up paying more over a longer period of time, and your credit score may take a hit. And using a payment plan for traveling makes it all the more finicky. As made evident by recent catastrophes at Newark International Airport, where passengers have had their flights delayed and canceled due to technical glitches and air traffic staffing shortages, travel plans are fickle at best.
“There’s all kinds of changes throughout the course of travel; flights get canceled, flights get delayed, you get rebooked to other things,” says Lisa Gill, an investigative reporter and BNPL expert at Consumer Reports. “Let’s say I’m going to go to New York, but oh, there was a blizzard and my trip has been canceled. The airline refunded the money, but it’s taking a long time. Well, I’m still on the hook for the payments…it can be weeks and weeks, sometimes months [until your refund is issued].”
Installment plans aren’t a new idea. NYC furniture store Cowperthwaite & Sons first introduced the method in 1807, allowing customers to buy items in stages. Other furniture dealers, sewing machine companies, and, most commonly, car manufacturers adopted installment plans; by 1927, almost two-thirds of cars in the US were purchased on installment. During the Great Depression, layaway, a process where a seller would reserve an item for a consumer and give it to them once it was paid off, increased in popularity. Once credit cards came along, however, layaway was rendered useless, and paying with plastic became the most common form of making a purchase without actually paying for it immediately.
There are vast differences between credit cards and BNPL plans, though. First off, applying for a credit card requires a hard inquiry, where lenders conduct a deep dive into your financial history, which can affect your credit score. Meanwhile, BNPL plans typically only require a soft inquiry; this simply lets the financial service take a look at your credit, and has no impact on your score. This can be convenient for those who don’t have established credit; it can also be dangerous.
“If you made a traditional purchase with a credit card, and you’re unhappy with that purchase, you have rights under actual congressional law,” Gill says. “The Truth in Lending and the Fair Credit Reporting Act cover a lot of credit card transactions, and the right that you have is called a Chargeback Right. But in the case of Buy Now, Pay Later, for all kinds of purchases, not just travel, they typically default to the merchants’ return policies.”
“It’s just another vehicle to finance our demise.”
In 2024, the Federal Reserve reported that consumers with “lower overall financial well-being” were the most likely to use BNPL plans because “it was the only way they could afford to make the purchase.” Plus, BNPL plans don’t help you earn points or build your credit score the way actual credit cards do, which can make applying for things like apartments or trying to subsidize a plane ticket much more difficult. And according to Barker, it’s actually common for consumers to use their credit cards to fund their BNPL purchases, like stuffing a financial turducken.
“Most people use some method of financing if it’s going to be for a house, for a car, for education. Financing is an important part of our economy,” says Brian Barker, a clinical associate professor at New York University’s Jonathan M. Tisch Center of Hospitality. “But whatever it is you’re financing, there are going to be pros and cons and risks associated with it, because essentially it means, in most instances, you don’t have the cashflow to pay for it flat out.”
Barker explains that for necessities like a car, it can be a smart move to pay in installments or even potentially go into debt to buy one. The real trouble with BNPL lies in its use for more than just essential goods. For example, when you open the Klarna app, options abound. Stores like Nike, Macy’s, and Best Buy hawk shiny new shoes and the latest generation of Airpods; most of them advertise cashback plans as well. There’s also a tab entirely dedicated to travel, featuring brands like Hotels.com, Priceline, and Hilton. The app even encourages its users to “follow” brands to stay up to date with all of the latest deals, which feel a bit like your chaotic high school friend’s Facebook status updates. One of the most troubling results of BNPL services like Klarna is that they give the illusion that fantasies such as a designer purse, a music festival, or a lavish beach vacation with friends are within reach.
“Most people, once they start using them, they start using them all the time,” Gill says. “And that’s what they’re hoping for. They make it really easy, it’s a point of sale. They create an entitlement to luxury goods and luxury experiences—that’s the addiction. Social media makes it seem like they basically normalized it as, like, ‘Oh, everybody gets to go to Coachella.’ No, they don’t.”
But the theory doesn’t always match reality. On May 19, Klarna reported that its customers were having a difficult time paying back their installment loans. While the company’s consumer network is rapidly growing, with over 100 million customers and recent partnerships with Walmart and DoorDash, Klarna’s credit losses were 17 percent higher than in Q1 2024, and 41 percent of BNPL users struggled to repay their loans on time. And it goes beyond the consumer; the travel industry, and our country as a whole, will reap the negative effects.
“In the short term, we’re going to see increased travel because we’re using [payment plans],” Barker says. “But from a long-term perspective, it’s certainly going to position us in a less than favorable standing, as it’s going to increase debt both for individuals as well as for the country. People will default on these services and impact their credit, and ultimately impact the overall debt that the country has. It’s just another vehicle to finance our demise.”
