FEATURE: Don’t forget your toothbrush
There is plenty to arrange before you travel abroad, but what financial considerations should you be making? Barney McCarthy takes you through the essentials
Planning for a holiday is usually an exciting undertaking, but it can be fraught with the worry of remembering to pack everything. And while you can pick up travel adaptors and suncream at your destination if you forget them, sorting out your finances once you’re abroad can be more difficult, so it is better to ensure you make the appropriate arrangements before you travel.
The most important thing is insurance. This is vital in case anything goes awry while you’re abroad, from losing your luggage at the airport through to an accident requiring medical attention. Research by Sainsbury’s Travel Insurance suggests that 10% of Brits ignore travel cover when holidaying, with this percentage travelling without it on their last trip.
Neil Laird, travel insurance manager at Sainsbury’s Finance, says: “Taking travel insurance on holiday is as important as packing your passport. It doesn’t matter if it’s a weekend away or your main summer holiday, if something happens while you’re abroad, you need to know that you have adequate cover in place to take care of things, whether it’s to reimburse you for lost or stolen belongings, to pay for any medical treatment or even to cover the cost of flying home early as a result of an emergency.” It is important to check your policy covers what you want it to, as not all products will cover cancellations and loss of baggage. You should also check who is covered (just yourself or other members of your party), what activities are insured and work out whether annual cover might be more affordable than trip-by-trip policies. For a more in-depth look at the issues surrounding travel insurance, pick up the next issue of Your Money, hitting shelves in July.
Money, money, money
Another extremely important part of your holiday is money. If you are planning to use your plastic when abroad then beware, as most providers levy a foreign usage charge which can be as much as 3% per transaction on credit cards. Debit cards carry similar charges which can come as a surprise to Brits accustomed to free banking. The only credit card providers who don’t charge for usage abroad are Abbey, Nationwide and the Post Office, with Nationwide the only provider not to impose any charges for debit card use.
Michelle Slade, analyst at comparison site Moneyfacts, says: “Nationwide is the only provider that does not make any additional charges for using your card abroad. Its FlexAccount current account does not require any minimum funding in order to take advantage of this. It may be worth opening an account with Nationwide just for use when you are abroad if you don’t want to switch your main current account.”
For those of you reluctant to flash the plastic abroad, you may wish to exchange currency before you travel. Although a handful of high street travel money providers claim they offer 0% commission, FairFX says this often hides the true margins they add to wholesale currency rates when providing foreign exchange for travel purposes. The prepaid currency card provider says the average premium is closer to 5% and can even rise to 11% if you leave it until the airport to change your cash.
Another method of payment while abroad is travellers cheques. Their main benefit is that they are insured and never expire, meaning that any left over can be used on your next trip, taking advantage of any fluctuations in exchange rates during that period.
Sarah Harrison, director of American Express Travellers Cheques, says: “The best option for travellers is to take a sensible mix of cash, credit or debit cards and prepaid forms of currency with them while abroad. Prepaid cards are becoming more popular, but the charges travellers incur by using them can be a sting in the tail. Travellers cheques are available completely free of charge and are completely insured against loss and theft.” However, Slade says they are waning in popularity. “There are only certain places you can cash them and the rate of exchange can be high. People like the convenience of using their cards and payments over £100 are usually protected anyway.”
Another possible expenditure to consider when going abroad is your mobile phone. Check the overseas tariffs before you set off to avoid any nasty surprises such as the costly bill incurred by a British lawyer recently on a trip to France. Not realising the “unlimited downloads” part of her tariff didn’t apply abroad, according to news reports she downloaded an episode of The Apprentice and two other BBC shows at a rate of £4.25 per MB, meaning she was hit with a bill of £4,900 for the 600MB file. This is a worst case scenario, but shows what can happen if you don’t check the terms of your contract.
Get your wallet in order before you set off, and you can kick back on the sun lounger without any lingering money worries.