From saving money to buying travel insurance, the effort of financing a summer holiday and keeping the costs down can be considerable.
The biggest challenge may be yet to come, however – avoiding the expensive mistakes that leave many holidaymakers counting the cost long after the trip.
For families in Scotland preparing for their holidays at the end of this month once the schools break up, there may be a sense that summer is finally here. All that’s left to do is enjoy it. Yet overseas trips in particular can be strewn with financial pitfalls, most of which can be easily avoided with a bit of pre-trip planning.
How much will it cost you to withdraw money from cash machines where you’re going? Will you rack up a huge mobile phone bill if you use it abroad? Is your bank going to charge you over the odds for using your cards outside the UK?
Here we look at the main financial decisions you’ll have to make just prior to and during your holiday, highlighting the ‘do’s and don’ts’ for those not wanting to pay the price of mishaps for months to come.
If you’re travelling overseas it’s always wise to plan your holiday money before you leave, and that includes getting the right deal for your currency.
Leaving it to the last minute often means buying currency at the airport, invariably the most expensive option due to a combination of uncompetitive exchange rates and high charges. Shop around for the best deals from the various currency exchange providers, including high street banks, and don’t forget you can order it online and have it delivered.
One way of searching is to use a comparison site such as www.moneysupermarket.com or www.mytravelmoney.co.uk.
Bob Atkinson, travel money expert at MoneySupermarket.com, said: “Leaving travel money to the last minute could mean you stand to lose up to £10 in every £100 you exchange if you choose to buy at the airport compared to planning ahead and ordering online for delivery to your home before you jet off.”
One option is to use a prepaid card which allows you to transfer money onto it from your bank account fixed at the exchange rate that day.
This can save money and offers more security than large wads of cash, but there are charges to look out for.
Andrew Hagger, personal finance expert at Moneycomms.co.uk, said: “These cards are chip and PIN secure, accepted wherever you see the MasterCard symbol and offer a cheaper way to pay than many high street debit and credit cards.”
He picks out the prepaid cards offered by Caxton FX, Fair FX, ICE and Travelex Cash Passport as the best deals, while highlighting the Post Office Travel Money Plus card as one to avoid.
The two different types of prepaid card are Sterling and Single Currency. The former is where you load money onto the card in pounds before you go and then use it like a normal bank card when you’re away, with the exchange rate taken at the time of purchase or transaction.
“The fees for cash and purchases tend to be cheaper compared with credit and debit cards,” said Hagger. Single currency prepaid cards are available in euros, US dollars and other currencies including the Canadian dollar and South African Rand. The money is again loaded onto the card before departure and converted to that currency at the point of transaction.
“This means that you don’t have to worry about what happens to the exchange rate while you’re away as you already have your Euros or Dollars and locked in the exchange rate, so they don’t need to be converted again when you spend while you’re away,” said Hagger.
Credit and debit cards
These days plastic can be used to pay for transactions virtually anywhere, but the charges will soon pile up if you’re not vigilant.
“Depending on your bank, you could face fees of up to £70 just for the privilege of using your card abroad, so it’s vital to know the fees attached to your card,” said Atkinson.
Most banks levy foreign usage fees of between 2.75 and 2.99 per cent of the transaction value, but there are some with lower charges. Taking cash out on credit card is definitely not recommended, attracting an extra 3 per cent on top of the foreign usage fee.
Among the cheaper cards are the Halifax Clarity, the Saga credit card for over-50s and the Post Office credit card, all of which are free of foreign exchange and withdrawal fees, said Hagger. However, he suggests leaving credit cards from Amex, Asda and HSBC at home.
Debit cards can also be costly to use overseas, with usage fees again from 2.75 to 2.99 per cent plus ATM withdrawal charges between £1.50 and £2.
“The charge that catches most people out is the debit card transaction fee where as well as the usage fee, some banks hit you with an extra £1 to £1.50 per transaction regardless of the amount,” Hagger warned.
Debit cards from the Norwich & Peterborough, Coventry and Nationwide building societies are among the most cost-effective to use outside the UK, said Hagger. More expensive are those from Royal Bank of Scotland, Bank of Scotland, Lloyds TSB and Santander, he added.
Cards – what not to do
Remember to tell your card issuer where you’re going, or it could block transactions as a fraud prevention measure.
And watch out for the famous “dynamic currency conversion” trap. This increasingly common practice involves retailers such as restaurants and ATMs providing the option of paying in sterling.
“If you are offered the chance to be charged in pounds rather than the local currency, then refuse the offer,” said Atkinson “The retailer adds a mark-up on the conversion to sterling of up to 5 per cent, meaning you pay more for the same goods and services.”
Car rental costs can vary hugely between country and supplier, making it essential to shop around. Analysis by iCarhireinsurance.com of costs in some of Europe’s most holiday destinations found that in the first week of the Scottish school holidays, families could pay double the amount they need if they choose the wrong option.
For example, the cost of hiring a car for a week in Tenerife ranges between £89 with Budget and £129 with Sixt. Hiring an Astra with Sixt in Faro will set you back more than £470, more than twice the cost of the same car in the same place with Hertz. The extras can vary significantly too, particularly adding extra drivers or renting a child’s car seat.