Travellers prefer using credit card, but averse to loans
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A personal loan comes for a lower interest rate while debit card does not entail any interest outgo, but most of the travellers prefer paying for their holidays through credit cards. A survey found that credit card tops the list followed by personal savings when it comes to meeting travel expenses.

A survey conducted by travel tech company Expedia found that 40 per cent of travellers across the top cities prefer to use credit card and pay off the amount later. While most of the cities had a high share of travellers using credit cards, 53 per cent of the respondents from Bangalore and 44 per cent from Pune preferred using credit cards.

Among the total respondents, 31 per cent dug into their savings to meet travel expenses and their numbers were higher in Delhi at 53 per cent and Chennai at 42 per cent. Those using debit cards were as low as 12 per cent, while travellers availing personal loan were miniscule at 4.7 per cent with none of the respondents from Delhi, Chennai and Bangalore preferring it.

“One can gain loyalty points and rewards and there is also a free credit period to repay money spend through a credit card. But credit card can turn tricky if one fails to repay within the free credit period and the amount falls into revolving credit. The interest rate can range between 12 and 50 per cent in that case,” said Suresh Sadagopan, founder, Ladder7 Financial Advisories.

According to him, If one has to travel on credit, personal loan rates are much cheaper ranging between 12 and 16 per cent and can also be paid back in EMIs. “Customers mostly make hotel bookings using credit card, when they want to block the amount at the current rate without immediately making the payment. In case of debit card, they will have to make the payment immediately,” said Karan Anand, head-relationships, Cox & Kings.

“I think it has much to do with the psychology of the traveller. Many people do not see credit card spending as leveraging oneself. They think about the free credit period and rewards as well as the convenience of swiping the card and ignore the consequences of not paying on time. Some are smart en-ough to manage payments within the time limit. But for travel expenses which can turn huge for overseas holidays, using credit card can also make things messy,” added Sadagopan.

Equally intriguing is the psyche behind people spending out of their savings, but not using debit cards much. Both come for no cost, but many prefer breaking their savings than using debit cards. 

Columnist: 
Sangeetha G.