Travel now, pay later is a dreadful idea. Here are 4 tips to get you on that beach without going into debt

The idea of splitting your travel bill into a few easy payments feels like a financial win and you’re tempted to book now, pay later.

After all, why shell out $1,500 upfront when a buy now, pay later (BNPL) service will let you pay $125 a month — interest-free for a year. That little button to split up the payments is right there at the checkout, calling your name.

Plus, everyone’s doing it. Why shouldn’t you get a break, too?

The problem is, it’s not free. It’s deferred debt. And that distinction can make the difference between a smart seasonal vacation splurge and a costly financial misstep. Missed installments can trigger late fees, credit score hits, and compounding debt.

Even if you pay on time, you’re still spending tomorrow’s cash flow, today, a problem when the holiday hangover bills land in January, and you have to make another monthly payment to Klarna, Affirm or Afterpay, the main BNPL companies … all for a trip long forgotten.

Here’s how to enjoy that winter vacation without turning it into a liability.

Build a vacation fund and use it all year round

Open a dedicated high interest savings account (HISA) and automate transfers into it each pay day.

If you know that the travel you wish to do in the year will cost $5,000 plus taxes, or thereabouts, and you’re paid biweekly (every two weeks), you’ll want to set aside about $195 to $200 every pay day.

This might seem like a lot, I know. But, even $50 a week (equivalent to a takeout order) adds up to $2,600 a year, which is enough to cover flights, hotels, and spending money without touching a credit card.

Keep funding this account even after your holiday by including it in your budgeting practice so next year you’ll have funds to use for those adventures, too.

If you get a windfall, such as a bonus, or happen to sell something on Facebook Marketplace or Kijiji, you can put some of it into this travel savings account as well.

I think of this as saving now, enjoying later (SNEL) — the opposite of BNPL — with no debt or stress.

Your credit card and banking services can help you travel for less

You might have travel insurance built into your credit card. Your bank might have ATM fees waived as a part of their perks. The exchange rate could be more favourable using one card versus another.

If you’re using a rewards credit card that offers cash back or travel points, figure out how to max out the value for your travel as you use these perks up.

As an example, with some credit card travel rewards programs, the greatest value for points is using them at off-peak times, and for long-haul flights.

You’ll also want to sort out how best to avoid unnecessary fees if you’re going abroad, and to determine the best way to pay for things — cash, credit or debit.

If you don’t have travel insurance through your work or bank, speak to an insurance professional (even the person who sold you your life insurance) to secure appropriate coverage for your travel.

It’s risky to travel without travel insurance, so work this into your budget.

Time your bookings to maximize value

Smart timing often saves more than any interest-free BNPL deal ever could.

Winter travel follows predictable pricing patterns. Flights are cheapest mid-week, at weird hours and on stat holidays. And hotel rates dip just before and after peak holiday periods.

If you’re thinking of a road trip, fill your car up when the prices are lower (sometimes a few days earlier than a long weekend, as an example).

If you start thinking ahead, and can be patient, booking off-season — like Mexico in June or July — can save you a bundle.

Keeping tabs on travel prices is like a full-time job, so fare-tracking tools like Google Flights or Hopper can be helpful when planning travel a few months down the road.

Cut costs without compromising your travel experience

To save in advance, cutting out fancy coffees, subscriptions and sneaker purchases, for even a few months, can add hundreds to your travel kitty.

On the holiday itself, think of ways to cut costs on things that don’t matter as much to you. Rather than taking taxis, Ubers and Lyfts everywhere, try public transportation or car pooling (aka ride-share) with other travellers.

Consider enjoying some free events, activities and festivities rather than paying for them.

But, if you do incorporate paid activities, work those costs into your budget, book in advance, and see if you can find a coupon. Offset food costs by packing your own snacks and meals here and there.

Before you book, reflect on the future state of your finances once you come back from your trip.

If you use savings instead of a BNPL plan, how will that feel both financially and emotionally?

If you end up using a BNPL plan, figure out how you will afford the payments?

Nothing will ruin the benefits of your vacation faster than a lingering bill to pay for it — when you haven’t got the money to pay.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.