The trick to book a flight today and pay for it next year

Inflation continues to hurt the wages of millions of people struggling to return to their regular spending habits, including those related to leisure travel, which has been curtailed for months by the pandemic.

A woman about to fly

A woman about to fly

From Klarna to Affirm to Afterpay, various “buy now pay later” have gained great popularity among those looking for a reliable alternative to traditional credit cards. These microloans allow you to split your purchase into multiple equal payments that will be repaid over time, usually with little or no interest.

The aviation industry continues to have significant demand, which means ticket prices are rising at the same rate and travelers now have to be creative when it comes to paying for their holiday.

Since the middle of the year, alarms have already sounded due to mass approval “buy now pay later“. According to a CNN report, the rising prices have prompted some cash-strapped shoppers to turn to these payment methods for everyday purchases, such as coffee, gas or groceries.

But now not only retailers are connected to these services, but also airlines. Consumers are “in the habit of using them” and are “excited” to do so while traveling, Tom Botts, Uplift’s chief commercial officer, told CNBC.

More airlines want to give customers the option to pay for flights in installments, instead of a lump sum; some even allow passengers to fly before the airline ticket is paid in full.

“This is not about giving consumers trips they can’t afford or encouraging them to take trips they shouldn’t,” Botts said. “It’s about helping consumers budget and pay for these dream trips.”

Uplift has partnered with more than 30 airlines, including United Airlines, Lufthansa, Air Canada and AeroMexico. Its strategy is focused “100% on leisure travel” and takes advantage of data that shows customers tend to “indulge when they can pay in installments,” Botts added.

Daniel Vega, director AeroMexico, considers the implementation of the service to be part of the company’s “evolution” to offer more complete payment options. “Customers will definitely buy their vacation airfare if they have affordable installments rather than a big upfront payment,” he told CNBC.

Botts says he’s seen an increase in customers buying premium and even first-class tickets when they wouldn’t otherwise — they’re no longer necessarily looking for the cheapest seats, he added.

How buy now pay later companies work.

Most companies frombuy now pay later” operate by issuing loans, but the process of accessing the service may be different in each of them.

Ascension, for example, runs a quick traveler’s credit check that they use to determine interest rates and payment schedules. These are actually short-term loans, which are decided “literally with the snap of a finger,” explained Botts.

Most of Uplift’s partners offer 0% financing, and in many cases, there is not even a cost to the consumer to go on a seven-day cruise and pay it off over time. Prices vary depending on the financial situation of the passengers.

another company answered Pay later. Travel It operates without credit checks or financing requirements, but passengers must secure the flight with a deposit and pay the full price of the ticket before the flight.

Meanwhile, the platform Division authorizes the full amount of the airline ticket on the passenger’s credit card, but splits the payments into three to 24 monthly installments. With each paid installment, the company reduces the hold on the credit line by the same amount.

The couple enjoys the sea

The couple enjoys the sea

Splitit does not provide loans or check travelers’ credit scores, said its CEO Nandan Sheth. All buyers need is enough available credit on their credit cards to cover the cost of the purchase.

“We don’t collect data on consumer purchase history … we don’t rip off customers and resell their offers,” he said.

Travel agencies are also joining the trend

Booking.com currently cooperates with the company Zipwhich allows travelers to pay for hotels, cruises, cars and travel experiences in installments.

“Flexible options are key for travelers … especially with all the uncertainty of the last few years and the ongoing uncertainty we’re seeing globally,” Booking.com Asia Pacific director Laura Houldsworth told CNBC.

The trend is particularly popular among Generation Z and millennials, who use payment plans for larger purchases at higher rates than other age groups.

One of the reasons young people are particularly drawn to these payment plans is that many saw their parents struggle with credit card debt in the midst of the 2008 economic crisis, explained Christine Roberts, director of Citizens Pay.

When it comes to expensive purchases, “this generation wants to understand the time frame of the payment,” says Roberts. “The option to pay over time allows you to stick to your budget and know when the payments will end.”

Botts, for his part, insists that credit cards are a “terrible way” to finance airline tickets, given the nature of their interests. In addition, it is not known whether the consumer can actually repay the loan.

“This simply transfers the payment risk to the card companies. It’s a really bad spiral for consumers,” he added.

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