Laura Whitcombe

Four ways to protect your finances on holiday

Four ways to protect your finances on holiday
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British families are forecast to spend £1,284.54 per person on this year’s summer holiday. That’s up more than £200 on what they forked out last year, says charitable shopping website Give as you Live. And with inflation gathering momentum and the pound still weak, many of us will feel we’re not getting a lot of bang for our buck when we finally get to our destinations. So it would be sensible to consider the simple steps you can take now to protect any money you’ve already spent on your trip – as well as what you’ll spend when you get there – to ensure you don’t end up paying out a penny more than absolutely necessary.

Step 1: Pay for everything over £100 on your credit card

As well as being able to spread the cost, another important advantage of using a credit card is that your purchases are protected by Section 75 of the Consumer Credit Act. This means that if anything goes wrong – for example, the holiday company goes bust or the pricey watch you bought turns out to be a fake –  you’ll be able to get your money back on transactions of between £100 and £30,000. This is because ‘the credit card company is jointly and severally liable for any breach of contract or misrepresentation by a retailer or trader’, explains consumer group Which?.

Credit cards also tend to offer competitive exchange rates (although foreign usage fees may apply) and should you fall victim to payment card fraud you can rest more comfortably knowing it’s the credit card company’s money at stake rather than the contents of your bank account. However, bear in mind that you may be charged a fee for paying by credit card (typically 2 or 3 per cent) so the added protection they offer doesn’t always come for free.

Step 2: Arrange travel insurance immediately

As soon as you book a holiday, you should put insurance in place. This is because as well as paying out should anything go wrong while you’re away – such as missing luggage, theft or injury – the vast majority of policies will also cover you for cancellation from the time you buy the insurance. And cancellation accounts for nearly a third of travel insurance claims made by UK holidaymakers, according to industry data. Circumstances it protects against include serious illness or injury of those travelling or even their close relatives, such as a parent or child (who isn’t travelling but with whom they would like to remain at home). In 2015, insurers settled 160,000 claims related to cancellation, with an average payout of around £800 per person.

Despite this, says that 58 per cent of travel policies taken out through its website are bought within a week of departure, 27 per cent are bought on the same day and only 15 per cent more than a month in advance of travelling.

Alex Edwards at says: ‘Most people book their holidays well in advance of travelling and they’re often committing a significant amount of money, especially if long-haul flights are involved. Having to cancel the trip for personal reasons could see them losing thousands of pounds if they don’t have the benefit of cancellation cover. Unfortunately, our research has revealed that more than half of UK holidaymakers are either making a huge assumption that only something which happens within a week of their holiday will cause them to cancel it, or they’re just not thinking about the risks at all.’

But he adds: ‘Although it’s wise to arrange your travel insurance very soon after booking your holiday, don’t immediately buy your holiday company’s or travel agents’ packaged cover. They’re usually more expensive than those you can find offering similar cover for a lower premium by shopping around online.’

Step 3: Beware rip-off car hire charges

Don’t get stung at the rental desk for ‘car hire excess insurance’, which can significantly bump up your hire costs. Here’s how it works. While your rental agreement will most likely include a ‘collision damage waiver’ or third party liability insurance, such policies give a false sense of security, says, ‘as if the vehicle is damaged in an accident or gets stolen, the person renting it is nearly always liable for the first portion of the loss, called the “excess”. The amount of the excess varies from one rental provider to the other, however it is usually between £500 and £2,000 per vehicle (it can be even more on high-value vehicles). This amount is often far more than the cost of renting the car in the first place. You can protect yourself against this potential sting by purchasing excess waiver for your rental.’

And this is what the rental desk will try to flog you when you collect the car. However, the comparison site says it has received ‘frequent reports of car hire renters being subjected to hard-sell tactics when picking up their car. These are designed to worry the driver into taking out an overpriced and underinsured waiver product.’

While the cost of this waiver can easily be £20 a day, if you purchase a standalone excess policy through TravelSupermarket, it costs from as little as £2.99 per day. A typical one-week policy would cost around £21 for European destinations such as Malaga, or just under £28 for a week's car hire excess insurance for destinations outside of Europe.

Step 4: Consider a prepaid currency card

As I mentioned in last week’s blog, prepaid currency cards, such as the FairFx Euro Currency Card Special, are useful for using abroad because they come with competitive exchange rates and low foreign usage fees – unlike bank debit cards linked to current accounts (for more information, click here). You can load money on to them before and during your trip and as well as the benefits outlined above, they also save you from needing to carry large amounts of cash or a bank card.

Laura Whitcombe is knowledge and product editor at