Brits to pay for their holiday on a credit card
Over five million Brits travelling abroad this summer plan to fund their trip on a credit card, according to research by moneysupermarket.com. Caution must always be taken when taking out credit of any sort and moneysupermarket.com offers holidaymakers some advice on how to make the most of their flexible friend when shopping for their holiday.
Cards that offer zero per cent on purchases are a great way of spreading the cost of a holiday throughout the year. The Platinum card from Barclaycard, for example offers a 12 month interest free period on purchases. Consumers taking out a zero per cent purchase deal should aim to repay the balance in full before the interest free period ends as the balance will incur higher interest charges and the overall cost of the holiday will increase. You must also ensure you pay at least the minimum repayment every month otherwise you will lose your interest free deal.
Reward cards are another great way to generate some value from big purchases like holidays. With benefits available to card holders ranging from cashback to air miles, cards such as the American Express Platinum cashback card could give consumers a nice lump sum towards the cost of next year's holiday.
Beware when spending abroad
Anyone thinking of using their credit card abroad should be aware of a trick called dynamic currency conversation. This is where retailers offer to convert the transaction into sterling at the point of sale, but in most cases they will use an unfavourable exchange rate which is far higher than the rate used by card providers.
If you are planning to use a credit card abroad for purchases, make sure there are no foreign purchase fees as many cards charge additional fees. In addition you should never use a credit card to withdrawal cash at a cash machine as you will be charged a higher rate of interest from the day of the transaction, typically around 30 per cent.
Kevin Mountford, head of banking at moneysupermarket.com said: "The decision to borrow should never be taken lightly and consumers need to be careful that they don't fall into a debt trap - they should never spend more on their card than they can afford to pay back. However, used responsibly, a credit card can be safe and a convenient way to pay for large transactions such as holidays and, provided they choose the right product could even generate some rewards to enjoy abroad.
"A holiday can be our biggest annual expense and so funding this purchase over the length of an interest free period makes sense. There are a great range of interest free products available for consumers looking to spread the cost of their holiday with the best on the market offering 12 months interest free. Some consumers may also use credit cards for large purchases in order to maximise the rewards that they receive, whether this be cashback, club card points or air miles that they can use for their next trip. Both these options can work well for organised, disciplined customers
"Many airlines and travel agent will charge a booking fee if you want to pay by credit card. However you must remember that paying by credit card offers greater protection for consumers booking holiday travel compared to paying by debit card or cash. With recent issues such as strikes, ash clouds and airline failures, paying an extra few pounds may be worthwhile. If you are planning to use your credit card while abroad, check first that your credit card is suitable for making purchases and many charge additional fees to do this. Using your credit card at a cash machine is a no-no as you will be charged a much higher rate of interest."