UAE travel instalment plans explained: Four ways to pay, the hidden fees and what experts say to watch out for

Dubai: Experts in the travel and tourism sectors have warned against dealing with travel instalment offers, especially products marketed under the slogan ‘zero interest’, as cost-free options, noting an increase in travel instalment products in the local market similar to other retail sectors. They emphasised the importance of calculating fees and future financial obligations before making a booking decision, noting that understanding the true cost of instalments involves more than just knowing if there are advertised interest rates. It also includes processing, delay, and rescheduling fees, as well as cancellation, booking modification, and refund policies. They stated that making a sound financial decision begins with comparing the total amount due, not just focusing on the monthly payment or the ease of obtaining financing. Instalment payments for expenses Banking expert Amjad Nasr stressed the importance of realising that instalment offers, which are marketed as having no interest or additional fees, are not necessarily without economic cost. Picture credit: Supplied Banking expert Amjad Nasr said that instalment payment services, whether through travel companies, instalment companies, or offers provided by some banks on credit cards, have become more widespread and attractive to consumers. He added that although these services may offer payment flexibility, the abundance of offers and ease of access may lead some to make spending decisions without adequately considering the impact on their monthly budgets. Nasr explained: “The main problem lies in the absence of sound financial planning and the lack of awareness of the importance of prioritising financial needs. When a person accumulates instalment obligations from multiple sources, he is cutting an increasing portion of his monthly income to pay off previous obligations.” He continued: “The danger of this behaviour is particularly evident when a job is lost, retirement occurs, an employment contract expires, or any circumstance leads to an interruption of income. In these cases, a person may find themselves facing ongoing financial obligations without sufficient savings to cover their basic expenses during the period of unemployment.” Nasr also stressed the importance of realising that instalment offers, which are marketed as having no interest or additional fees, are not necessarily without economic cost, as the service provider may benefit from fees collected from the merchant or service provider, or from commercial arrangements with financing entities. The bank may also benefit from transaction fees collected from the merchant when using the credit card. Therefore, the consumer should look at the actual cost and his future obligations and not at the phrase ‘interest-free instalment’ alone. He said, “Instalment is a financial tool that can be used consciously, but it should not become a means of financing a lifestyle that exceeds one’s actual spending capacity.” He explained that instalment with a one-time administrative fee means that the customer spends using the credit card, then converts the amount into monthly instalments for a one-time administrative fee, which may be, for example, 1%, 2%, or 3%, depending on the offer and the bank’s terms. He continued, “There is promotional instalment without interest or fees. As for converting purchases into instalments with interest, the bank allows the amount due on the card to be converted into monthly instalments, with interest or a profit rate calculated on the instalment balance, according to the approved period and pricing. Here, the total cost depends on the interest rate, the method of calculating it, the repayment period, and any additional fees.” Facilities and demand Bader Ahli, CEO of Dubai World Travel, confirmed that instalment plans for travel bookings are gaining popularity in the local market. Picture credit: Supplied For his part, Bader Ahli, CEO of Dubai World Travel, confirmed that instalment plans for travel bookings are gaining popularity in the local market, with the increasing spread of these facilities that allow travellers to book airline tickets and tourist accommodation, even though profit margins in the travel sector are lower, compared to other sectors, for the entities that provide financial facilities. He added that the wide availability of these options reflects the importance of travel in the lives of residents, as it has become a lifestyle for a wide segment of society, and not just an exceptional activity limited to annual vacations, at a time when instalment plans allow the cost of the trip to be spread over a period of time. He continued: “But this flexibility does not necessarily mean that booking in instalments is the least expensive option,” stressing the importance of reviewing the cancellation and modification conditions before completing the booking, and being aware of the potential fees and obligations resulting from changing or cancelling the trip date. He exp