Dubai: Are you one of those who does not own a credit card like me? Well, it can be an issue, like it was for me when I recently travelled to Canada.
My travel plan was Dubai – Toronto – Montreal – Vancouver – Montreal – Toronto – Dubai.
At first, I had a hotel stay planned only at Vancouver as I was transiting through Toronto and staying with my daughter in Montreal. The Vancouver hotel booking was for six nights. I booked the hotel from Dubai a month before my travel.
The hotel had asked for a credit card to make a pre-authorised booking. My son made the hotel booking for me via his credit card. I thought this would be good enough and I would pay the hotel in full with my debit card when I get there.
The flight tickets were made via my debit card. So there was no issue on that front.
The trouble begins
When I reached Toronto, I had a long layover enroute Montreal and was exhausted after my 15-hour flight journey from Dubai. I wanted to rest, so I headed to the airport hotel to book a room for the layover time. But my debit card would not accepted for the hotel booking.
The front desk lady insisted on a credit card. I asked her to check with the hotel manager who also refused my request.
“It is the policy of the hotel to only accept credit cards and not debit cards,” I was told.
I made a frantic call to my son who was on a work zoom call and had to cut it short in order to answer me. I explained my situation and he provided his credit card details to the hotel which accepted his card.
A few weeks after my stay in Montreal with my daughter, we travelled to Vancouver. We were taking a domestic flight from Montreal to Vancouver, where the inflight services, including food and drinks, were chargeable. I thought I would use my debit card. But sadly, no.
Our flight from Montreal took off at 10pm. My daughter and I had decided to not to eat at the airport, instead take dinner on the flight. It was a big mistake. I had just $20 (Canadian) in cash in my wallet thinking my debit card, along with my daughter’s, could be used for any purchases. But the crew would not accept them inflight.
“We only accept credit cards. No cash, no debit card,” we were told.
Thankfully, a fellow passenger was kind enough to offer to pay for my daughter’s meal with his credit card after I paid him the $20 bill I had.
Again, as we were checking into the hotel in Vancouver – the front desk asked us for my son’s credit card to process our booking as it was the card used earlier. Of course, I was not carrying it with me. How could I produce it for them? After begging and pleading with them, they finally agreed to take my debit card and punched in the details.
By now, I had learnt my lesson. Never again, will I travel without a credit card which I must first acquire.
Why credit cards?
Why do hotels, inflight services and car rentals insist on credit cards? It is because of the pre-authorisation requirement that comes with these types of bookings.
What is pre-authorisation?
A pre-authorisation is a hold over the funds on a card. A merchant such as a hotel or car hire company estimates the cost of the bill and uses the credit card as a guarantee. The merchant puts a hold over the pre-authorised amount which the credit card holder cannot use to make purchases. Banks do not recommend using debit cards or pre-paid cards for pre-authorisation, but instead use them only for the final bill settlement.
T.K. Raman, CEO of Finance House, said it is not ideal to travel without a credit card though there are ways to circumvent situations. “Credit cards work best when you travel because of the issue of pre-authorisation. It can be difficult to make a pre-authorisation on your debit card. Most merchants come to know if a card is debit or credit. The first six digits of your card tell merchants if it is a debit or credit card. So hotels and car rentals may not be able to accept the card.”
Raman said there are no temporary credit cards in the market. “What you get is credit cards for free and no annual fees. So people can buy those types of credit cards. There are plenty of credit cards that offer benefits for customers.”
Sanjiv Purushotham, who runs and manages two digital finance companies, Bridge DFS and The Dao One, said travellers could greatly benefit by carrying credit cards as they bring great leverage to customers.
“For some, flexibility overrides savings and credit cards enable this. The flexibility is in terms of spending power. But along with power comes responsibility. It is highly critical for consumers to clearly plan out the repayment plan. It does not have to be immediate repayment alwyas, but it has to be defined in terms of time and amount. The best ways to repay are to set aside four to six instalments that take care of the actual amount to be repaid as well as the interest cost. Similar to paying back on an auto loan. Managing credit is a powerful weapon for both the new cardholder as well as affluent senior cardholders,” explained Purushotham.
“What’s more, most credit cards come bundled with merchant offers and freebies that can overcome the higher charges if planned carefully,” he added.
What about multi-currency prepaid cards?
Purushotham said it makes sense to carry a multi-currency prepaid card though they do not take care of the pre-authorisation requirement.
“Many of us do not have credit cards. It could be a matter of choice or circumstance. However, most merchants, especially travel-related ones, expect some kind of card payments. A prepaid card enables you to bridge that gap,” said Purushotham.
“In a post-pandemic world of exponentially higher cyber-crime especially with payments, would you rather that your entire credit card limit gets exposed or just the maximum that’s on your multi-currency prepaid card?,” asked Purushotham.
Most prepaid multi-currency cards are like bank accounts on your phone. They use highly user-friendly apps that enable you to see what’s happening with your money in real time as well as take advantage of destination-specific offers and coupons from within the app. Credit cards with open lines-of-credit can tempt you to spend on what you’ve not planned for. With a prepaid multi-currency card, you can spend up to your limit. If you want to to top up, most such cards enable you to do so via mobile banking or similar remote methods. You can always ask friends to add to your funds digitally.
Lock the rate at which you exchange your dirham into a foreign currency and save on the three per cent to five per cent hidden foreign exchange (FX) charges on your credit card statements. The FX element becomes even higher if your merchant gets you to pay in your home currency.
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