Enjoy your holiday without breaking the bank
Rising everyday costs and the reduced availability of credit is causing households across the UK to rein in their spending, but the annual summer getaway is one expense many of us are not prepared to forgo.
A break from our busy lives is regarded as a necessity - rather than a luxury - for many Brits, according to a survey by Mintel. It found a major foreign holiday was voted people’s most important spending priority, with a short break close behind.
Research from travel search website, Kayak.co.uk suggests a similar determination to get away this year. While 66% of people said they are starting to feel the pinch, 60% said they would rather forego luxuries than deny themselves a summer break. Of course the effects of the global credit crunch mean that holiday finances are likely to be a little tighter this year, but it’s still possible to have a great time without breaking the bank.
So, whether your holiday is already booked or you’re still planning your trip, there are plenty of things you can do to cut your costs and boost your spends.
Where to go
If you haven’t already booked your holiday, the overall cost of visiting a destination may influence your decision, particularly as the falling pound is making holidays in the Eurozone substantially more expensive.
The Post Office's Holiday Costs Barometer - which monitors the price of a basket of 10 holiday items such as a cup of coffee, sunscreen and three-course meal for two with a bottle of house wine - found Thailand to be the cheapest destination at an overall cost of £28.58, compared with Australia at £88.97.
Spain emerged as the cheapest Eurozone destination, where the typical cost of these tourist staples was £59.24, up to 15% less than in the most expensive destinations, France, Portugal and Italy. Outside the Eurozone, Bulgaria, Turkey and Croatia were among the most affordable, at around £40–£50.
Flights and accommodation
When it comes to buying flights and accommodation, there are huge savings to be made if you take some time to shop around. As a general rule, independent travel - where you book your flights and accommodation separately – is cheaper than a package deal.
The internet comes into its own for booking affordable and independent travel, and there is a huge number of websites, such as cheapflights.co.uk, skyscanner.net and Kayak.co.uk, that can quickly search for flights across a number of airlines.
Kellie Pelletier, vice president of communications at Kayak.co.uk, says flexibility is the key to getting the very best deals. "If you can give or take a few days with your departure date, or even select a bigger search window in which to travel, such as the whole month of August for example, you’re likely to find some great value flights," she adds. "Prices are inflated during July and August, so if you can wait until the children return to school, you’ll see prices fall by around 50%."
If you’re open to an adventure and can be flexible with your destination, then you can take advantage of the current best value deals across the world. For example, the ‘Fare Buzz’ feature on Kayak.co.uk allows you to select a departure airport and maximum price and search all available flights.
With hotels, prices don’t fluctuate as much, but there are more special offers and discounts around. Websites such as laterooms.com, kayak.co.uk and lastminute.com all detail the latest prices and offers, and tripadvisor.co.uk is a really useful site containing hotel reviews by fellow travellers.
With so much organising needed before jetting off, it’s easy to forget travel insurance, but a good policy - in addition to an European Health Insurance Card (the new E111) if you’re heading to Europe - should be next on your to-do list after flights and accommodation.
"It’s important to book your insurance at the same time as your holiday," says Sam O’Connor, a spokesperson from insurer Columbus Direct.
Even if you are travelling on a budget, you can find comprehensive and affordable cover if you shop around. With package holidays you’ll usually be offered insurance, but be careful before you accept, as it can be expensive.
When shopping for travel insurance, it’s important to look beyond the premium to the level of cover provided. Consider what you’ll be doing on your trip and whether the activities you are planning, such as skydiving, whitewater rafting or skiing, for example, are included. Also keep an eye out for the excess.
If you plan to go away more than once this year, it’s worth going for an annual multi-trip policy - it will save you money and hassle.
You could be forgiven for thinking that your insurance costs will be lower if you are aged over 65, as you are less likely to take part in extreme sports or drinking games in Ibiza, yet this is rarely the case with mainstream providers.
Fortunately, a number of insurers specialise in cover for the over-65s, such as Columbus Direct, and insureforall.com.
It’s advisable to use a mix of spending options on holiday. When shopping for currency and traveller’s cheques, it’s important to look at both the exchange rate and the commission charge to weigh up how much you’ll get for your pounds. Banks and airport bureaux de change are worth avoiding, as exchange rates tend to be pretty poor.
The big players that tend to offer consistent rates are the Post Office, Marks and Spencer and Travelex. However, lesser-known foreign exchange services, like Thomas Exchange, can sometimes prove to offer the most competitive exchange rates so it is worth doing your research before you buy.
Prepaid cards that allow you to load currency and make normal transactions using a PIN number and signature are also a good idea for travelling because they can help you stick to a budget. The fact that they’re not linked to your current account also makes them more secure. Travelex and the Post Office offer travel money cards in US dollars, euros and pounds sterling.
You can lock-in the exchange rate before you travel and upload the card online or over the phone. Providing you use the card in the local currency - don’t use a euro card in the US, for example - you won’t incur additional foreign exchange rates or charges, but as with using credit and debit cards abroad, cash withdrawal fees apply.
One advantage of using credit and debit cards over currency is that they offer better exchange rates because banks use the wholesale Visa or Mastercard rate, which is more competitive than normal foreign exchange services. Many cards charge a foreign loading fee of up to 3%, however, which can eat into this saving.
Two providers don’t levy this fee: the Post Office on its Classic Mastercard, and Nationwide on its credit cards and current account debit cards.
Unfortunately you can’t escape the fee when you use a credit or debit card to withdraw cash overseas, which is around 2–3% on most cards, so try to limit the number of withdrawals you make.
Another cost to be aware of is dynamic currency conversion (DCC) which can leave holidaymakers seriously out of pocket. DCC has been in use by restaurants and hotels on the continent for some time, and has recently been rolled out at cash machines.
When you withdraw cash or pay using a card, you are given the choice to pay in the local currency or sterling. Opting to pay in the local currency will use your own bank’s foreign exchange rate, whereas paying in sterling - which may appear to be the easier option - will use the retailer’s or a foreign bank’s exchange rate.
Without carrying a calculator, it’s difficult to work out which option is best, but it’s generally wise to go for the local currency and the security of your own bank’s rate.
Whether you opt to take a taxi, train or drive to the airport is likely to depend on your location, but booking ahead can save you money on all three options.
If you’re taking a cab, it’s wise to book in advance and ring around a few local companies to get the cheapest quote. Remember to book your return ride as well, because airport taxi ranks often charge inflated rates.
If you plan to drive and park at the airport, make sure you pre-book a space to avoid the extortionate rates charged if you just arrive and pay at the gate, which can be up to 60% more.
The key is to book in advance using one of the many aggregator sites, such as Holidayextras.co.uk and Parking4less.co.uk. These sites allocate both on and off airport parking spaces with free shuttles to the terminals.
Car rental is always going to add a chunk to the cost of your trip, but leaving it until the last minute to arrange this at your destination airport can cost even more. Inflated tariffs at airports coupled with currency confusion and language barriers could lead you to paying way more for car hire than you need.
The best approach is to pre-book using one of the price comparison sites, such as opodo.co.uk, travelsupermarket.com or kayak.co.uk, which search all the car hire companies to bring you the best deals.
The excess on car hire agreements can be pretty steep, in some cases as much as £1,000 according to Which?, so you could get stung with a hefty bill if the car is damaged or stolen while in your care.
A good way to negate this potential cost is to opt for an independent policy, such as one from Insurance4carhire.com, which costs £49 for an annual European policy, and £59 for a worldwide one.
So, once you've booked your holiday, bought insurance and holiday money, and arranged your travel arrangements all that's left to do is relax and enjoy your trip.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
A debit card that works in the same way as a pay-as-you-go mobile: you top it up with cash and then use it just as you would a normal debit/credit card. Although some are badged Visa and MasterCard, pre-paid cards are not a credit card; you can only spend what you load. Prepaid cards are aimed at people who might not traditionally hold bank accounts – children, teenagers, people with poor credit ratings, migrant workers, and benefit claimants – and there are no credit checks on the applicant.
The difference between two currencies; specifically how much one currency is worth relative to each other. For example, if £1 is worth $1.50, converting sterling to US dollars, the exchange rate is 1.5. Converting dollars to sterling at those levels, the exchange rate is 0.66, so $1 is worth 66p. There are a wide variety of factors that influence the exchange rate, such as a country’s interest rates, inflation, and the state of politics and the economy in that country.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.