Booking a Holiday Using a Credit Card?

There is nothing better than the chance of jetting off on a much-deserved holiday.

Even though many usually wait for last-minute deals, families with children who are restricted to specific holiday dates might choose to book as far in advance as possible to make sure that they get the holiday they have been dreaming of.

Booking a holiday can be an exciting time, but no matter when you decide to take the plunge, it is important not to overlook how you will pay for it.

Paying with the use of a credit card?

Purchases that are made with the use of a credit card benefit from improved purchase protection that is included in the terms of the Consumer Credit Act.

If the travel provider goes bust and you have not got travel insurance, you can still claim the entire sum of your money from your credit card provider, even if you only paid for the deposit using a card and the rest of the balance in cash. However, as per Consumer Credit Act rules, take note that this only applies when the cost of the holiday that you are buying is more than £100.

[Note: if you purchase your holiday through a travel agent, you may only get this particular level of protection if you buy their entire suite of travel arrangements,  including a package holiday. For example,  if you just purchase an airline ticket, credit card protection may not be applied, as the agent is only the ticket's supplier and not of the flight itself.]

There are additional benefits, too, especially if your card offers a generous cashback or reward scheme.

Credit Card Charges

However, you must weigh any rewards that you may receive versus any credit card charges that the tour operator or travel agent or the tour operator may charge. Many travel agents or tour operators still ask for credit surcharges, for example of 1.5 percent of the holiday cost. This covers them for credit card fees that they incur for using either the MasterCard or the Visa systems (also known as the interchange fee). The said fees are now capped at 0.3 percent of the total cost of the credit card transaction. The holiday company may, however, incur other fees for credit card transactions so many charge a higher amount.

Need to borrow?

Borrowing money in order to go on holiday is not an ideal solution. For most people, however, spreading the cost of a holiday on a percent credit card is the only way that they can be able to afford a family getaway. If this sounds a lot like you, make sure that you use a credit card that is offering a long introductory 0 percent interest period for purchases.

Make sure to set yourself a repayment plan. It is important that you pay off your holiday before the end of the 0 percent interest period, and preferably before you will need to book for next year's holiday, otherwise, you risk an increasing debt that will only become more difficult to manage. Some credit cards will allow you to set up a direct debit for a fixed percentage, and many will permit a standing order for a set amount.

Clearing your balance by making these automated payments will help you achieve the discipline that is required to repay your holiday debt.

Begin saving for next year!

The earlier you begin saving, the easier things will be regarding booking and paying for your holiday. Starting to save in small monthly or weekly instalments is basically what you're doing when you make  credit card repayments, so why not get ahead of the game and save some money immediately?

The first thing to accomplish is to open a new savings account. When analysing savings accounts, bear in mind that you will probably require access to your savings at least twice, first to pay for the deposit when you book your holiday, and the second to pay for the balance (typically around 12 weeks before you are due to depart). An account that enables you to make regular deposits is also a great idea, thereby allowing you to make small regular payments every time you get paid as compared to one lump sum, and meaning you are able to build up your holiday fund over the year.

A regular savings account could be a good way to kick-start the savings habit and ensure that you squirrel away a bit every month, or if you are planning in advance for a big trip abroad, then a short-term fixed rate bond may be a good idea.

Bonds that run for six months to a few years propose good returns, with some allowing early access to funds. It is always worth reviewing the terms and conditions of your chosen account, however, as penalties will usually apply for withdrawing funds within the term of the deal.