How long will it take to pay off your Summer Holiday?

09-Jul-2010

Everyone loves a summer holiday, but it seems that some of us are willing to sacrifice our financial wellbeing for a mid-year break.  New research by protection specialist Bright Grey has found that UK adults plan to borrow over 12 billion GBP in total to fund their summer holidays this year, and that 10% of us will take two months or more to pay off holiday debts.  

Of the UK adults surveyed, 32% are planning to borrow money in order to get away.  This equates to a total of 10 million holidaymakers over the course of the summer.  The borrowing will either take the form of credit card debt, a travel agent's payment plan or a loan from friends or family.

The average spend on a summer holiday is over 1,200 GBP, and over half (58%) of the respondents claimed that they do not have the money available to repay the debts straight away.  If the holiday is being paid for on a credit card, this could add an additional 100 GBP of interest a month to the cost of the holiday until the debts are repaid - based on credit card borrowing at the average UK APR (annual percentage rate) of 18.7%.

Although the average summer holiday apparently takes 4.3 months to organise, there is still time to save yourself from a post-holiday debt hangover.  Firstly, if you are planning to use a credit card to cover some or all of your holiday costs, try and improve on your credit card interest rate ahead of your trip.  

Depending on your credit rating, you might be able to move to a card with a 0% introductory rate on purchases.  If you do not qualify for one of these cards, you may still be able to move to one with a lower interest rate than you pay with your current provider.  Compare credit card deals here, and remember that you should plan to pay off the debts before the end of your introductory rate to avoid hefty interest charges.

To avoid getting charged fees for credit or debit card usage abroad, and to ensure that you do not go over budget once you're away, consider loading a prepaid credit card with enough money for the trip.  A prepaid card is a secure way of taking money abroad, that can be used as an alternative to travellers' cheques.  Some good news if your credit rating has taken some knocks is that providers do not require credit checks.
    
There are other ways of avoiding unwelcome expenses on your summer holiday.  As 9 in 10 Britons do not plan to travel outside of the Europe this year, the majority of UK holidaymakers will be able to benefit from the European Health Insurance Card (EHIC), which enables travellers within the EU, or Iceland, Lichtenstein, Norway or Switzerland to receive free or cheaper medical treatment that becomes necessary.  Apply for a free card via their website. 

You should also make sure that you have the correct travel insurance for your trip even if, like almost a third of Britons, you are planning a holiday within the UK this summer.  Get a great deal on your travel insurance here. 

Roger Edwards, proposition director at Bright Grey said: "Getting away on holiday can be a high point of the year for many people, however with one in three borrowing to pay for their getaway, it is important to make sure they don't end up with a financial holiday hangover on their return. Planning ahead for the future financially can help avoid using expensive emergency measures to cover them for the short-term and also mean that everyone can enjoy the sun without the grey cloud of debt hanging over their heads."