What happens to your refund if you pay for a trip with buy now, pay later?

Last autumn, someone booked a flight and paid for it with buy now, pay later, in instalments. Then the US government shut down and the airline cancelled the flight. The airline refunded the money, just not to the traveller. It went to the company that had lent the money for the ticket. That company never passed it on, and the loan stayed open.

I know this because the traveller wrote to the US consumer finance watchdog, and plenty of others have written complaints like it. I spent a few weeks reading them, and they point to a gap in how Buy Now, Pay Later works for travel. It seems to be getting wider.

Where the refund goes

If you pay for a hotel with a credit card and cancel, the refund goes back to your card. With Buy Now, Pay Later there's a lender in between. The lender pays the airline or hotel up front, and you pay the lender back over time. So if the trip is cancelled, the refund goes to the lender, who is supposed to shrink or close your loan.

Most of the time that probably works. When it doesn't, you're stuck between two companies that each say the other has your money. The hotel says it refunded you and sends proof. The lender says it can't find the payment. Meanwhile the instalments keep coming, and the people it hurts most are often those already juggling several of them, as I found when I looked at who pays for holidays this way. Some get late fees, some get interest on money that was already returned, and some see the loan reported to the credit bureaus as unpaid for a trip they never took.

That matters more the bigger the trip is. Take the Huvafen Fushi week I priced in The bill, about $12,500 for two. If a trip like that were cancelled, a refund stuck between the resort and the lender would be real money.

The complaints are harder to find now

For years anyone could search these stories online. The Consumer Financial Protection Bureau (CFPB) published complaints word for word, without names. In August 2026 it stopped, and the texts moved to a big archive on a separate page.

I downloaded two years of that archive, the year before May 2025 and the year after, and read every complaint about a Buy Now, Pay Later lender that mentioned a flight, hotel, cruise, holiday rental or something similar. Two things stood out. Travel complaints about these lenders nearly tripled from one year to the next, much faster than complaints about the lenders in general. And the fastest-growing kind was exactly this story: the merchant cancelled or refunded, and the loan kept running anyway. That kind became about five times as common.

Who actually gets money back

Every company that gets a complaint has to say how it was closed: with money back, or just with an explanation. When travellers complained about a credit card after a cancelled or refunded trip, more than one in four ended with money back. With Buy Now, Pay Later it was rare. At Affirm, which you see at checkout on sites like Expedia, nearly every complaint since 2021 was closed with an explanation, and one out of almost 18,000 ended with money back.

To be fair to Affirm, that label is Affirm's own, and it doesn't tell the whole story. A loan that was quietly cancelled after a complaint could still be filed as an explanation. I sent Affirm these findings on 11 November and asked for a reply by 20 November.

The rule that was withdrawn

Credit cards do better partly because the law gives cardholders a formal way to dispute a charge. For a short while, the US watchdog gave the same dispute rights to Buy Now, Pay Later. In summer 2024 it decided these lenders should follow the credit card rules, and in May 2025 it withdrew that decision. The rise in travel complaints came in the year after. I can't prove one caused the other, because Buy Now, Pay Later also kept growing fast. But the protection was gone just as more people needed it.

Other places are going the opposite way. Since July 2026, many Buy Now, Pay Later purchases in the UK have the same protection as credit cards, so if the hotel or airline lets you down, the lender is on the hook too. In the EU, new rules apply from 20 November 2026 that let people go to the lender when the seller doesn't deliver and won't fix it, once they've tried the seller first. How far that goes differs per country, and many countries were late turning the rules into law. So the same cancelled flight gives you very different chances of getting your money back, depending on where you live.

What I'd do

I'm not saying never book a trip in instalments. If the price fits your budget, a clear plan can be perfectly reasonable. But a trip is one of the few things you buy that can simply stop existing. Flights get cancelled, hotels overbook, plans change. And I always look at the full price first, because a small monthly number makes a trip feel smaller than it is (I wrote about that effect). If I ever financed a trip, I'd keep three things in mind:

• The refund goes to the lender, not to you.
• When you cancel, ask the airline or hotel for written proof of the refund, with a reference number.
• Check your loan a week or two later. If nothing has changed, start asking questions right away.

A trip can be cancelled with one click. The loan, it turns out, takes a lot more convincing.