Holiday money what is the best way to pay
for your holiday?
A holiday can be a big investment;
if your holidays are important to you then they should be included
in your day-to-day budgeting so that they don't become a big, once
a year expense. How can you enjoy the benefits of a relaxing break
if you are worrying about how much it all costs and how you are
going to pay for it?
Plan in advance and save for the trip
A good idea is to open a new savings account and set it up solely
as a holiday fund not to be touched for other things, except
in dire circumstances. Julia and Andrew, her partner, have set up
a joint account they call the 'fun fund', both paying in an equal
amount by direct debit each month. This makes the saving easy as
it happens automatically, and it means they don't have any pangs
of conscience when they spend the money on just having fun.
Make sure you have the right sort of account, it's no good having
it locked away in a limited access high interest account when you
suddenly want to take a weekend city break! You need easy access,
but with a reasonable rate of interest, so it's earning a little
for a few extras on the holiday too. But before you just set up
a new savings account with your current bank, take a look at savings
rates available with other banks and building societies; rates can
Borrowing the money
We can't all be as organised as Julia and Andrew and we sometimes
find ourselves in need of a holiday when we haven't the funds available
to pay for it, or when our funds are tied up in other ways
this is when a loan can come in handy.
If it's a big trip, perhaps a honeymoon or that once in a lifetime
cruise, a personal loan is probably the best way to go. With a personal
loan you can spread your payments over an extended period. Check
the details of the loan before you commit yourself, we suggest you
go for one which has the flexibility of early repayment so that
you can pay it off early if you find you have the funds at the time.
Both 'accident, sickness and redundancy cover' and 'life assurance'
are good things to look for too and some plans offer life cover
free of charge.
If it's a smaller amount, or a short term loan you need, you might
consider paying for the trip by credit card but take out
a new card before you book and look out for a good introductory
rate, this will often beat anything on offer as a personal loan.
But beware, special deals are often limited in duration and rates
can sometimes rocket after that. Check the actual terms thoroughly
before you sign up, and be sure you can pay off the holiday cost
within the offer period if you don't want to pay high interest rates.
Making the booking cash, cheque or credit card?
So you've chosen the holiday, what is the best way to make the payment?
We recommend payment by credit card as it comes with several advantages:
It gives you greater flexibility; buy using the interest
free period you have longer to find the money and, provided
you pay the bill off by its due date, you needn't pay extra
If you aren't worried about paying interest (particularly
if you have set up a new favorable credit card account, as
discussed above) then you can spread the cost at your convenience.
You can pay on-line. Increasingly you can pay holiday deposits
and even the full holiday cost on-line, it's a quick and convenient
way to pay.
By using your credit card to pay for the holiday (provided
it's more than £100) you get the benefit of cover by
the credit card company. They become equally liable for providing
a refund if the holiday is not supplied, turns out to be unsatisfactory
or if the holiday company goes bust. The down side of this
is the surcharge that is often applied by the travel agent
or tour company a typical charge of around 1% or £15
think of it as an insurance premium. Tip: ensure
you pay for the holiday on a credit card belonging to one
of the participants of the holiday; otherwise you could miss
out in the event of a claim.
Credit cards often come with free travel insurance if you
pay for your trip using the card sounds tempting, but
check the terms carefully. Often the insurance is limited
to accidental death or injury and may also come with a time
limit. Terms and conditions will vary from card to card, so
you are advised to check the terms on your own card thoroughly.
You are best buying dedicated travel insurance for full cover
and to look on the credit card travel insurance as an extra
Some credit cards offer 'cash back', reward points or air
miles. If you are planning to pay for a high value item like
a holiday these rewards can add up very nicely. Pick one that
offers air miles and get one holiday to start you saving for
the next, or use your 'cash back' for some extra treats on
Paying by debit card is another option, but be aware that this
is more like paying in cash or by cheque, and does not give you
the same protection as a credit card payment.
Once you have paid
It's important to have a record of your payment in case of dispute,
so make sure you get a clear receipt, particularly important if
you are paying on-line.
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