Get your travel money plans in order this summer

scots holidaymakers taking overseas trips could pay a heavy financial price if they fail to get their travel money plans right this summer.

Thousands of people throw money down the drain every year by making easily avoidable mistakes in their holiday planning, whether it’s failing to take out insurance, using credit cards with extortionate charges or getting a poor deal on their currency.

Experts advise taking extra time on travel money matters this year, as the costs of getting it wrong could mount up quicker than ever at a time when household budgets are already squeezed.

Thousands of Scottish holidaymakers have seen their plans scuppered in recent years by airline failures (not least Edinburgh-based Flyglobespan), holiday firms collapsing and unforeseen circumstances such as the Icelandic ash cloud that grounded flights for several weeks in 2010.

For many people, the disappointment of seeing their holiday ruined has been compounded by the cost, not least for those who thought they were covered by their travel insurance only to find insurers digging their heels in over policy exclusions.

There was a 27 per cent increase to more than 2,500 in the number of complaints to the Financial Ombudsman Service (FOS) about travel insurance in the 2010-11 financial year.

It is handling a similar level this year, thanks to a rise in disputes over insurance claims made when holidays are cancelled or cut short or when luggage has been lost or delayed.

Consumers secure compensation in around half of all cases handled by the FOS.

Yet so much of the financial grief that comes with cancellations, accidents, lost luggage and other holiday problems is avoidable.

The key to making sure you don’t lose out is to avoid the common mistakes that are so often made before you’ve even packed for your trip.

TRAVEL INSURANCE

THE most common travel money mistakes are made right at the start of the holiday booking, according to Bob Atkinson, travel expert at MoneySupermarket.com.

“Some people opt to take the insurance provided by the travel agent they are booking with, which is often much more expensive than standalone policies and might not include everything you need and the right levels of cover,” he said.

“Others make the mistake of not taking out any insurance at all from the moment they book their holiday and this leaves them without any cancellation cover if they are no longer able to travel.”

Cancellation cover has become a real bone of contention for holidaymakers in recent years, judging by complaints made to the FOS, and is a good reason not to leave travel insurance until the last minute.

It should be included as part of any travel insurance policy and usually pays out around £1,500 if your trip is cancelled or cut short due to reasons outlined in the policy (such as injury, illness and jury service).

Most travellers choose their insurance by cost alone; tempting, especially in the current climate, but all too often a waste of money in the long term.

Nine out of ten holidaymakers end up uninsured, under-insured or wrongly insured, research by insurer Axa found.

Look for a good deal by all accounts, but make sure it’s good value and not just cheap, said Atkinson. “There are really cheap policies available that might appeal, but if they don’t give you enough cover for medical expenses, your luggage or reimburse the cost of your holiday it is a real waste of money.”

Some people fall into the trap of assuming their European Health Insurance Card (Ehic) is sufficient for peace of mind when going abroad – but they would be wrong.

“The European Health Insurance Card is not a travel insurance, so you should apply for the free Ehic to work alongside a full travel insurance policy,” said Atkinson.

You could also save a fair bit of money by taking out an annual policy if you’re likely to travel two or more times over the coming year.

Compare the cost and levels of cover for both single and multi-trip options and ensure you factor in any activities you plan to do (perhaps if one trip is a skiing holiday, for example).

Too many people pay the price for assuming that travel insurance will cover any pre-existing medical conditions they have, or by failing to disclose those conditions. It’s estimated that one in five people don’t tell insurers of pre-existing medical conditions, leaving them at risk of having any claim on the policy being rejected.

“There are specialised travel insurance policies for those who need cover for pre-existing conditions, so don’t opt for the wrong type of insurance,” said Atkinson.

“Pre-existing conditions can be anything from asthma and diabetes to cancer and heart disease, so understand whether you need a more advanced policy and opt for the right one.”

CREDIT CARDS

MOST of us use our credit and debit cards to get hold of money when overseas these days, but take the wrong one and you could be shocked by the charges that build up.

Most cards charge a fee of 2.99 per cent for every overseas transaction, but a handful boast a 0 per cent transaction fee on purchases abroad. These include the Platinum cards from the Post Office and Saga, the Sainsbury’s Gold card and the Clarity card from Halifax (this isn’t available through Bank of Scotland).

But don’t use your credit card to take money from an ATM – the interest charges are even higher on overseas than domestic withdrawals.

Debit cards also charge around 2.75 to 2.99 per cent on overseas transactions, plus an additional charge of up to £3 for cashpoint withdrawals.

The only debit cards that don’t charge for overseas usage are available from Metro Bank, which doesn’t have a branch north of the Border, and Norwich & Peterborough building society.

Nerys Lewis, head of credit cards at comparison site Confused.com, said: “Credit cards with perks like this tend to be aimed at customers with good credit ratings, so if you’re credit rating isn’t great it may be worth considering pre-paid card. You load them up like a pay-as-you-go phone and then use them in the same way as a debit or credit card.“

Pre-paid cards can be loaded up with the relevant currency or currencies at a competitive exchange rate before the trip. For example, if you’re in the eurozone over the coming months now could be a good time to add euros to a card in order to “lock in” the current strength of the pound.

Providers of pre-paid cards include the Post Office, Caxton FX, Travelex and Virgin Money. All charge fees, but the advantage of the cards is that they give you a pool of spending money separate to your bank account and help you budget accordingly.

Top cash travel tips

• Use pre-paid cards with no or low fees as an option for safe and easy access to cash for spending overseas.

• Frequent travellers should invest in a credit card designed for overseas usage – this gives you the best rates and NO charges.

• If you use an existing credit or debit card abroad ensure you’re aware of the charges or fees before you spend – they soon add up.

• For good deals on cash, buy in advance online for the best exchange rate. Buying at airports is the most expensive location costing you up to 10 per cent more.

• If you need currency at the last minute, pre-order online for airport pick up to take advantage of online rates.