Prepare your finances for the trip of a lifetime

Students and graduates planning gap years are being urged to prepare well financially before departing for the trip of a lifetime.

With exam season drawing to a close, price comparison website moneysupermarket.com is warning ‘gappers’ to review their financial products carefully before embarking.

Stuart Glendinning, managing director of price comparison website moneysupermarket.com, said: “A gap year may be great fun and a richly rewarding experience, but graduates and students will find it difficult to get the best financial deals as most won’t have an employment history nor will many have built up a good credit history. Indeed, without much of a credit profile, their most viable option is to approach their current bank.

"Taking sensible financial steps ahead of the venture will ensure travellers make the most of the financial products available to them.”

moneysupermarket.com provides the following tips for potential ‘gappers’:

Savings

Some gap year travellers will work their way around the globe while others will save before they go. Those who have saved cash to fund the trip should seek out the best savings deal. The market-leading savings account is the Alliance & Leicester DirectSaver account with a 6.1 per cent APR and a minimum investment of £1,000. ICICI Bank’s HiSAVE Savings Account has a 6.05 per cent APR and a £1 minimum investment.

Overdrafts

Gap year travellers leaving for their time abroad after university should hold a graduate bank account with their high street bank and may find salvage in a generous overdraft facility, which normally reduces over a set time after graduation. Prospective travellers with a good track record may find their bank will extend the facility temporarily.

Debit cards

A debit card may seem the easiest way of completing transactions abroad, but ‘gappers’ should be wary of the hidden costs and charges associated with such usage. Most providers, including HBOS and Barclays, levy a currency conversion fee of 2.75 per cent and a purchase fee of around £1.50.

Nationwide is the only major provider not to make a foreign currency charge on purchases and cash transactions anywhere in the world. Price comparison website moneysupermarket.com has found someone making ten €25 purchases would pay a total of £169.47 with a Nationwide debit card but an astonishing 12 per cent more with Barclays and HBOS at £189.13.

Travellers should check their provider is able to supply a replacement debit card within 24 hours in an emergency, and that it will be delivered worldwide. They should also make sure they have the emergency telephone number close to hand.

Credit cards and loans

Gap year travellers may find it difficult to get the best rates. Without regular income, they may struggle to make repayments and find themselves in a situation where they are lumped with high charges they cannot afford.

Prepaid

Prepaid cards are useful abroad as they have the security of a debit or credit card, allow the carrier ATM access and can be used to make purchases. Furthermore, for budget-conscious travellers there is the advantage that it is impossible to take more money out than you have put on.

The Travelex Cash Passport doesn't charge an application fee or a monthly fee, but should only be used for purchases as its ATM charge is £2.50.

Mobile phones

To get the maximum saving it is important the traveller signs up for the international discount tariff their provider offers, such as Vodafone’s Passport/International Call Saver or O2’s International Traveller Service. The 3 network is best in Australia as it has its own network there and charges all calls at the standard bundle rate – potentially saving 90p per minute. In addition, 3 has a student offer giving an extra 1,000 free texts in its £15 per month tariffs.

Insurance

Comprehensive travel insurance is essential and the policies vary widely. Travellers need to think about the activities they are likely to do. For example, 12-month worldwide cover for an 18-year-old male will cost £206.95 with Elect Travel Insurance's Gold Extended Stay, but this excludes rock climbing, bungee jumping and sky diving. In contrast, Leading Edge's £251 Backpacker Policy excludes hang gliding, parachuting, paragliding, sky diving and some whitewater rafting.

Skiers should expect to pay higher premiums again, and those who plan to dive while away should be aware they are usually only covered down to 30 metres. In general, insurers will not cover your belongings if they are not adequately secured while you are away and most have clauses relating to the consumption of alcohol, so it pays to tread carefully.

Stuart said: “Before leaving, gap year travellers should give photocopies of their financial product details with a trusted family member. It could make life easier in an emergency. These tips might sound menial, but it’s vital they are carried out or researched to ensure you are in the best financial position whilst away. Failure to do so might mean having to cut the trip short or being stranded with no money, which could be distressing and dangerous.”