Financial Perspectives

I was leafing through the categories and funnily enough though I write a fair bit about both holidays and finance I don’t think I’ve ever written something that covers both!

So, with the Christmas holiday season coming up, how were you planning on financing the holiday? Christmas is perhaps the worst holiday to finance as you can have a “worst-case” scenario in terms of finance with the potential for both Christmas presents and a foreign holiday which makes for quite a big bill for some people.

In an ideal world, you’d have saved up for it all months in advance, but then this isn’t an ideal world, is it? Therefore many people are looking to borrow money to finance it all.

Fortunately, many people are in the same boat and therefore there are lots of offers of credit around at this time of year. As a rule, avoid store credit for the presents as this is often the most expensive form of credit and instead look towards the banks. If you’ve not used up all the 0% card offers, this is the time to get filling in the appropriate application forms which can get you up to 9 months interest free credit on purchases and, if you’re lucky enough, you might be able to finance both the Christmas presents and the holiday with one of these cards.

One thing to avoid though is the head in the sand approach that many people take. That attitude will almost certainly cost you dear and you’ll end up paying way over the odds for your borrowing. Even if you can’t get 0%, at least check what interest you’re paying on your credit cards and use the one with the lowest rate to buy whatever needs bought.

There seems to be something of a drift from issuing Visa cards to issuing Mastercards in the UK at the moment thereby reversing the previous trend which was to only issue Visa cards.

Although it doesn’t really matter which you have in the UK, it can matter a lot when you go on holiday and generally it’s best to be carrying both Visa and Mastercard abroad. In that respect the switch of my Halifax Visa card to a Mastercard suits me as that gives me a Mastercard credit card from them and a Visa debit card but others could easily find themselves with a Maestro card and a Mastercard which isn’t a good combination as Maestro isn’t nearly as useful as Visa debit and you’re left with two cards on the same system which isn’t good either.

Not a catastrophe for sure but do make sure that you have both varieties of card handy well in advance of your next holiday.

Of the hundreds of people who have stayed with us over the course of this year, only two or three have paid using the Nationwide credit card which is crazy as they’re the only place that doesn’t charge to use your cards overseas.

Perhaps more crazy though is that of the dozen or so couples who live in Spain and have used us as a pitstop on their way to/from the UK, only one used a Nationwide card as they’re spending quite a considerable chunk of their income on bank charges. Quite how much is staggering. For example, a friend who lives in Brussels let drop once that he just used his Halifax card in the same way that he had done when living in the UK ie he would lift £20 or £30 each time he needed some money and likewise when he was paying for the groceries or whatever.

Most people read the bit in the credit/debit card charging information that says “currency exchange 2.75%” and figure that he wouldn’t have run up much of a bill. However, there is a transaction charge on all overseas use of the card of, at that time, £2 (and I gather it’s now £3) PLUS the 2.75% foreign exchange charge. So, that £20 cost him £2.55 ie 12.75% and, yes, he was paying around 12% of his entire income each month on bank charges!!

Clearly it’s quite different if you’re living abroad vs going on holiday but that minimum charge soon mounts up if you lift small amounts of cash. Whilst it’s much better to use the Nationwide card and pay nothing, if you are using a fee charging card you should lift a minimum of £100 or so each time and thereby reduce your costs to 4.25% to 4.75% depending on your bank and, whenever possible, use your credit card for purchases rather than making cash withdrawals.

See our guide at holiday money for more information.