How two travellers funded the same $8,000 holiday – and who came out ahead

Sun-soaked terraces, slow lunches, late nights… a few carefree weeks away sounds ideal. But before you book those non-refundable fares, you’ll need to decide how to pay for your getaway.

To test how funding choices can shape the true cost of travel, let’s look at a comparative scenario. Sarah and Nick are taking the same holiday, but their approach to paying is different: one locks in certainty with a personal loan, while the other chases rewards with a credit card.

Two ways to pay for the same trip

Both travellers budget $8,000 each.

Sarah has excellent credit and selects a fixed-rate $8,000 Harmoney unsecured personal loan over three years at 5.76% p.a. (comparison rate* 6.55% p.a.). The monthly repayments are predictable and there’s a set end date if she makes them all on time.

Nick opts for ANZ’s Rewards Platinum credit card. He’s approved for a $10,000 limit with 44 interest-free days, provided he pays the balance in full each month. He’ll receive 60,000 Velocity Points after spending $3,500 on eligible purchases within the first three months from approval, plus $50 cashback to his card. He’ll also earn ANZ Rewards Points on eligible purchases.

His plan: collect the frequent flyer and rewards points, utilise the flexibility, and pay it off fast.

Spending in real time

The trip itself is sensational, but the reality of the costs are immediate.

Sarah gets her $8,000 upfront and starts repaying $260 a month, even while she’s away.

Nick swipes his credit card for flights, hotels, meals and experiences, racking up rewards points while drawing down his credit limit. He receives his first statement after he returns. Nick can affordably pay around $1,000 a month over the next three months but because he didn’t repay the total owed during the interest-free period, the annual percentage rate (APR) has kicked in.

Now, he's adding to his debt.

The cost comparison – personal loan vs credit card

Let’s examine the numbers to see how their borrowing choices stack up:

Note: This example is for illustrative purposes only. Actual costs and features may differ depending on the products and individual circumstances.

Balance transfer twist

After making three initial payments totalling $3,000 Nick realises his interest costs are piling up and he can no longer afford the same payments. In order to reduce his payments, he decides to switch to NAB’s Low Rate credit card, offering 0% p.a. balance transfer for the first 12 months. However, there’s a $59 annual fee and 3% transfer fee (calculated on the balance owed).

By transferring the remaining balance of $5,478.69, Nick can pay down his debt without accruing any interest, provided he makes sufficient repayments on time and avoids any new purchases he can't affordably pay off during the interest-free period.

Balance transfer to the rescue: post-holiday repayment strategy

How to avoid holiday debt traps

Sarah’s personal loan offered certainty from day one: predictable repayments of under $260 a month over a fixed three year period. Her total cost for the $8k trip came to $9,357.84, making it a straightforward, budget-friendly option. If she’d decided to make free extra repayments, she would have paid down her loan faster and cheaper.

Nick’s approach was riskier. He used a credit card, chasing rewards points and flexibility. He started with $1,000 monthly repayments for the first three months, then switched to paying less than half that ($475.17) per month on a limited time interest-free balance transfer card to reduce the size of his payments and eliminate any further interest charges. 

Alternatively, if Nick had been able to continue to make $1,000 monthly repayments on the ANZ credit card, he would have been able to clear his debt in just nine months but would have paid $108.79 more in interest. If he’d stuck with ANZ but reduced his payments to $475 per month, his total costs on top of the principal would have been approximately $1,172.

Switching cards early also meant he missed out on 20,000 extra bonus Velocity Points, which required him to keep his ANZ rewards card for at least 15 months. Still, by moving to a balance transfer card and sticking to his repayment plan, Nick ended up paying $655.79 less than Sarah overall and cleared his debt 21 months sooner, while keeping his accrued rewards points.

However, his monthly repayments were nearly double those of Sarah’s and, depending on his financial circumstances, this may have put pressure on his cash flow and monthly budget.

Comparing debt repayment strategies

What's the best way to pay for a holiday?

The most stress-free approach to any holiday is to save up the full amount and pay upfront. This guarantees you'll pay no interest charges and prevents the post-holiday debt hangover.

However, if that's not possible both strategies above can be effective, depending on your repayment habits. If you value structure and predictability, a personal loan can help you stay on track and avoid surprises. If you’re confident you can manage spending and repayments, using a credit card to realise points bonuses or utilising a balance transfer might be suitable.

It’s also important to remember that there are often several options available for you to change your repayment size, frequency and interest charges over the course of your debt obligation. The real challenge begins once the holiday ends and the repayments start rolling in.

Find the right personal loan or credit card for your holiday

*WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments.