Who uses buy now, pay later for holidays? I was surprised

I always figured that people who use buy now, pay later for a holiday were scraping together a trip they couldn't really afford. That turned out to be wrong, and the real picture is more interesting.

This year, for the first time, the US Federal Reserve asked Americans what they had bought with Buy Now, Pay Later, travel included. The Fed published the headline numbers. I wanted to know who these holiday borrowers actually are, so I went through the answers of nearly 13,000 people myself.

They're better off than I expected

About 8.3 million American adults paid for part of a trip this way in the past year, which is the first official count of its kind. Among everyone who uses pay-later, the people who financed a trip are the best off. Of them, 39% live in households earning $100,000 or more, compared with 14% of those who financed groceries and 28% of those who financed clothes. Almost six in ten (57.5%) said they were "doing okay" or "living comfortably", more than in any other group, and nine in ten already have a credit card.

So these aren't people who can't get credit. They have a card in their wallet and chose to split the trip anyway.

But most couldn't cover a surprise $400 bill

The Fed also asked whether people could cover an unexpected $400 bill with cash, savings or a credit card they would pay off at the next statement. Of the travel borrowers, only 35% could. That's barely better than people who financed clothes (31%), and far below the 69% of Americans who don't use pay-later at all. Of the travellers who had called themselves "doing okay", just over half (53%) couldn't. In a smaller group asked how big an emergency they could pay from savings alone, almost a third said less than $100.

It gets stranger at higher incomes. In households earning $100,000 or more, 89% of the people who don't use pay-later could cover the $400. Among travellers on instalments in that same bracket it was 50%. Same income, half the safety net. And nearly half of those high earners (47%) said "it was the only way I could afford it" was one of their reasons the last time they used pay-later.

Could cover an unexpected $400 bill

Travel borrowers35%

Bought clothes31%

Don't use pay-later69%

Same, in households earning $100,000 or more

Travel borrowers50%

Don't use pay-later89%

Fed SHED 2025, public-use data, weighted. Travel borrowers in this income group: 136 respondents, margin of roughly 9 points.

You'd think they would just use the card. Plenty of them have one, and 46% of the travel borrowers with a card had carried an unpaid balance most or all of the time in the past year. Of those, 62% said not wanting to use a card was one of their reasons for choosing pay-later. I can't tell what was going through their heads, but it looks like a card that already carries a balance, and a holiday that goes somewhere else. Next to the debt, not instead of it.

The holiday is usually not the only instalment

What the monthly price at checkout doesn't show you is everything else it sits next to. Of the people who financed travel, 77% had used pay-later for something else that year, across 2.5 different kinds of purchase on average, against 1.5 for other users. More than half had financed clothes, a third electronics, and 22% groceries or food delivery.

You see that in late payments. Among all users, 20% of those who used pay-later for one kind of purchase had paid late at least once, 30% of those who used it for two kinds, and 57% of those who used it for four or more. Travel borrowers paid late more often than other users (29.5% against 24.9%), and 19% were charged extra for it. (Late fees can also come from the other side: when a trip is cancelled and the refund goes to the lender instead of the traveller, some people keep paying on a trip that no longer exists. I looked at those complaints separately.) Even when I compared people with similar incomes, ages and savings, travel borrowers were about 1.6 times as likely to have paid late. But once I also counted how many different things they were paying off, that difference disappeared.

So the data doesn't say that financing a holiday makes people fall behind. It says that the people financing holidays are often already juggling other plans, and the trip is just one more line on the list.

What the numbers can't tell us

The survey covers a whole year, so it can't say whether a late payment was for the holiday or for the sofa. The reasons people gave refer to their most recent pay-later purchase, which may not have been the trip. It shows who uses these plans, not what the plans do to them, and it's American data, so other countries may look different. I also don't think financing a holiday is automatically a mistake. A fixed, interest-free plan for a trip that already fits your budget can be perfectly sensible.

Still, only 18.5% of travel borrowers showed none of three warning signs: no cash for a $400 emergency, a card balance carried most of the time, and a late payment. That's fewer than one in five, in the group that looks safest on paper.

What I'd ask myself at checkout

A monthly price is made to be looked at on its own, which is why it feels manageable. I ran into it at Expedia, where a $387 hotel room came with "$32 a month" next to the button, and it turns out that number changes what people book. So when a holiday is offered to me at $50 a month, I'd ask how many other $50s I already have running. A trip can feel affordable at $50 a month, and feel very different as the third $50 a month.