Credit Cards & Loans
One in four set to pay for their holiday on credit
A further 5% of those planning a summer getaway will take out a personal loan to pay for it.
Younger people aged 25 or under were the most likely to use a credit card to pay for a holiday (29%).
Meanwhile, those aged 35 and under were the most likely to use a loan for a holiday (9%), the survey from comparison website Go.Compare showed.
More than a third (40%) said they had enough money in their bank account to pay for their summer holiday. Of the 2,000 people polled, those aged 65 and over were most likely to pay for their trip through their income.
Using a credit card to book a big purchase, like a holiday, can have benefits. If something goes wrong, such as a holiday company going into administration, there is extra protection under Section 75 of the Consumer Credit Act.
However, in the current cost-of-living crisis which has seen household incomes squeezed and millions missing credit repayments and struggling with paying bills, using credit for something like a holiday could lead to more financial stress if borrowers aren’t able to make repayments.
Indeed, the financial regulator, the Financial Conduct Authority (FCA) today revealed one in four adults are struggling to meet their everyday bills.
Credit card holidays: Pros and cons
Ceri McMillan, travel insurance expert for Go.Compare, said: “It’s worrying that a significant proportion of people are planning to use their credit cards or take out a loan to cover the cost of a holiday this year.
“This could be yet another knock-on effect of the cost-of-living crisis, where disposable incomes are being squeezed and people are having to use other methods of payment for big purchases.
“It may be that some people are opting to pay for their holidays on their credit card as it means you are further protected if your travel firm collapses – most credit cards offer buyer protection on purchases between £100 and £30,000 – but it also provides the chance to spread the cost of the holiday across the year.
“But for whatever reason people are using their credit card, it is always important to fully understand the benefits and risks to your financial decisions, no matter how big or small.”