Dubai: Are you one of those who don’t have a credit card like me? Well, that can be a problem, as it was for me when I recently traveled to Canada.
My travel plan was Dubai – Toronto – Montreal – Vancouver – Montreal – Toronto – Dubai.
I originally planned a hotel stay only in Vancouver as I was transiting through Toronto and staying with my daughter in Montreal. The hotel reservation in Vancouver was for six nights. I booked the Dubai hotel a month before my trip.
The hotel had requested a credit card to make a pre-authorized reservation. My son made the hotel reservation for me through his credit card. I thought that would be good enough and that I would pay the hotel in full with my debit card when I got there.
Plane tickets were made through my debit card. So there was no problem on that front.
The trouble begins
When I arrived in Toronto, I had a long layover en route to Montreal and was exhausted after my 15 hour flight from Dubai. I wanted to rest, so I headed to the airport hotel to book a room for the layover. But my debit card would not be accepted for the hotel reservation.
The lady at the reception insisted on having a credit card. I asked him to check with the hotel manager who also refused my request.
“It is hotel policy 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 and had to interrupt him to answer me. I explained my situation and he provided his credit card details to the hotel who accepted his card.
A few weeks after my stay in Montreal with my daughter, we traveled to Vancouver. We were taking a domestic flight from Montreal to Vancouver, where onboard services, including food and beverages, were chargeable. I was thinking of using my debit card. But unfortunately, no.
Our flight from Montreal took off at 10 p.m. My daughter and I had decided not to eat at the airport, but rather to have dinner during the flight. It was a big mistake. I only had $20 (Canadian) cash in my wallet thinking that my debit card and my daughter’s could be used for any purchase. But the crew would not accept them in flight.
“We only accept credit cards. No cash, no debit card,” we were told.
Luckily, another passenger was kind enough to offer to pay for my daughter’s meal with her credit card after I paid her the $20 bill I had.
Again, as we were checking into the hotel in Vancouver, the front desk asked for my son’s credit card to process our reservation as it was the card used earlier. Of course, I didn’t take it with me. How could I produce it for them? After begging and begging them, they finally agreed to take my debit card and entered the details.
By then, I had learned my lesson. Never again will I travel without a credit card that I must acquire first.
Why credit cards?
Why do hotels, in-flight services and car rental companies insist on credit cards? This is because of the prior authorization requirement that accompanies these types of reservations.
What is pre-authorization?
A pre-authorization is a hold on funds on a card. A merchant such as a hotel or car rental company estimates the cost of the bill and uses the credit card as collateral. The merchant holds the pre-authorized amount that the cardholder cannot use to make purchases. Banks do not recommend using debit cards or prepaid cards for pre-authorization, but rather using them only for final bill settlement.
TK Raman, CEO of Finance House, said it’s not ideal to travel without a credit card, although there are workarounds. “Credit cards work best when traveling because of the pre-authorization issue. It can be difficult to pre-authorize your debit card. Most merchants know if a card is debit or credit The first six digits of your card tell merchants whether it’s a debit or credit card, so hotels and car rental companies may not be able to accept the card.
Raman said there are no temporary credit cards on the market. “What you get are free credit cards with no annual fee. People can therefore buy these types of credit cards. There are many credit cards that offer benefits to customers.
Sanjiv Purushotham, who runs and manages two digital finance companies, Bridge DFS and The Dao One, said travelers could greatly benefit from owning credit cards as they bring great leverage to customers.
“For some, flexibility takes precedence over savings and credit cards allow it. The flexibility is in terms of purchasing power. But with power comes responsibility. It is very important for consumers to clearly plan the repayment plan. It doesn’t always have to be an immediate refund, but it should be defined in terms of time and amount. The best ways to repay are to set aside four to six installments that take into account the actual amount to be repaid as well as interest charges. Similar to paying off a car loan. Credit management is a powerful weapon for both the new cardholder and affluent senior cardholders,” Purushotham explained.
“Additionally, most credit cards come with merchant offers and freebies that can overcome the higher fees if carefully planned,” he added.
What about multi-currency prepaid cards?
Purushotham said it makes sense to have a multi-currency prepaid card although they do not support the pre-authorization requirement.
“Many of us don’t have a credit card. It may be a matter of choice or circumstance. However, most merchants, especially those related to travel, expect some sort of card payment A prepaid card allows you to bridge that gap,” Purushotham said.
“In a post-pandemic world of exponentially higher cybercrime, especially with payments, would you rather have your entire credit card limit exposed or just the maximum that is on your multi-currency prepaid card?” asked Purushotham.
Most prepaid multi-currency cards are like bank accounts on your phone. They use very user-friendly apps that allow you to see what’s happening with your money in real time and take advantage of destination-specific offers and coupons from within the app. Credit cards with open lines of credit can entice you to spend on things you didn’t plan on. With a prepaid multi-currency card, you can spend up to your limit. If you want to top up, most of these cards allow you to do so via mobile banking or similar remote methods. You can always ask your friends to add to your funds digitally.
Lock in the rate at which you change your dirham into a foreign currency and save on hidden exchange fees of 3-5% on your credit card statements. The FX element becomes even higher if your merchant charges you in your home currency.