Once the festivities of Christmas are over and the New Year has well and truly been brought in, you may find yourself submerged in the January blues.
If you want to boost your spirits at this time of year by escaping to a warmer climate, here’s some useful tips for planning your next holiday.
Paying for your holiday with a credit card
Before you book your holiday you’ll probably take the time to carefully consider what your budget is. This is especially important if you choose to pay for it on your credit card. Do not be tempted to spend more than you can afford on the trip as this could make it difficult to pay back what you owe, and your finances may be strained as a result.
When making payments with your credit card, there are certain protections in place that give you added security. One of these is Section 75, a law which covers any purchases worth over £100 that are made on a credit card.
Section 75 was put in place to ensure that you are never paying off debt for something that didn’t arrive or wasn’t as it should be. So if a firm that you use to book a holiday through goes bust or cancels your trip, not only are they liable to give you a refund (although they may not be able to) but your lender is too.
In order to be covered under Section 75, you have to spend over £100 and up to £30,000 on a ‘single item’, excluding any fees or delivery charges. The definition of what a single item is can be tricky to pinpoint, especially when it’s not clear whether it’s the overall bill or the item that should total over £100. To help you wrap your head around this, have a look at the following example:
If you travel to and from your destination on flights costing £90 outbound and £30 return, although the total cost of your flights are more than £100 you are not protected under Section 75 - as no single ticket cost more than £100.
If you want the benefit of protection under Section 75 when you pay for your holiday, you could consider a package deal. Because everything is included, it will probably cost more than £100 and should be classed as a single item, although you could check with your credit card provider. In booking this type of trip, your holiday will also be protected by ATOL. Do be aware, however, when booking a package holiday or flights that some companies will charge you a fee for using your credit card to pay. In many cases, such fees won’t arise if you pay by debit card.
Alternatively, putting a deposit down on your holiday using your credit card should cover you if anything were to go wrong with your booking, providing this down payment is over £100. Under Section 75, you are protected for the whole cost of an item even if you only partly pay for it with credit.
A time when it can be tricky to make a claim under Section 75 is when you use a third party to pay for your holiday. For example, if you buy a flight from a travel agent they are only responsible for providing the tickets and not the flight, so if your flight is cancelled it may be difficult to make a claim against them.
Taking your credit card on holiday
As well as protecting you when you book your break, your credit card can also provide you with a convenient and secure way of paying for items abroad when you head off on your holiday. Not having to carry around large amounts of cash with you will hopefully make it less likely that your money will be misplaced or stolen – and it can be very difficult to reclaim the cash if it does. If, on the other hand, your credit card goes missing, you can contact your provider to cancel it and ensure no one is able to spend your money. You may also be able to get a refund on any transactions that aren’t made by you.
Be aware that fees can arise when using your credit card to withdraw cash or spend money while abroad, so make sure to double check with your bank what you will be charged beforehand. You could browse the credit cards specifically designed for use overseas and apply for one for your trip, as these are typically cheaper to use than standard credit cards as they don’t always add an extra fee to the exchange rate.
If you plan to use your usual card when you travel, be aware that your use of it once you arrive may be seen as ‘abnormal’ spending activity. It’s therefore a good idea to notify your card provider before you head off on holiday to reduce the risk of problems occurring. Letting your bank know that you will be using your card abroad won’t automatically mean that your card works the first time you use it, but it should reduce the risk of difficulties arising.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.