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Getting into debt by overspending on holidays

25 September 2009

Holidays are a time to relax and forget about stress for a while. For many people, however, they are also a time when budgets are forgotten. This can lead to debt problems through overspending, which can happen in a number of ways.

To begin with, many Britons will not consider skipping their annual break in order to save money, as it is, to them, a necessity rather than a luxury.

Dermot Blastland, managing director of TUI Travel UK, has said that most customers would not skip their main foreign holiday even if they needed to reduce their expenditure.

Spokesperson for the Association of Independent Tour Operators Ian Bradley also holds this belief.

"It`s really being viewed as a necessity rather than a luxury," he explains.

According to Mr Bradley, holidays also take up a considerable proportion of most people`s income, meaning debt problems could ensue if the break is thought to be essential.

He believes that holidays are the third-biggest expenditure met by most people in a year, topped only by payments for houses and cars.

With holidays considered to be necessary, there are still measures that can be taken to keep costs down and prevent debt, but often these are disregarded.

Abbey Credit Cards has found that "staycations", in which people holiday at home, can still turn out to be costly.

Its research has found that even UK-based holidays in resorts are 39 per cent more expensive on average in the middle of August than just one month earlier. In September, it becomes even cheaper.

Abbey also discovered that people who take foreign holidays in high summer pay considerably more than if they go at other times.

The increase could be as high as 40 per cent for some places such as Portugal.

As a result, both staycationers and eurozone travellers could run into debt problems by being made to pay higher costs if they cannot take their holidays during off-peak times.

The volatility of the euro is another issue that may cause people to spend more than they should do during their holidays.

Fluctuating exchange rates can make it difficult to foresee or realise just how much one has spent in real terms while abroad, but the pound`s recent performance against the euro can exacerbate this problem.

Currency specialists Caxton FX found that in late August, the pound hit its lowest value against the euro for two-and-a-half months.

The pound was further destabilised by the news that several members of the Bank of England`s monetary policy committee wanted greater quantitative easing, though it did recover later.

Britons may be affected by factors such as these which they cannot control, but often they fail to take anti-debt measures that are within their power.

It has frequently been stated by a number of organisations that using the wrong type of travel money while abroad can rack up excess fees.

Credit and debit cards can incur charges such as foreign exchange fees, usually about three per cent, when making a purchase in a currency other than sterling.

According to Abbey, Britons paid about £73 million this year in such costs.

In addition, this is widespread, as most people use their debit or credit cards to make payments while on holiday, which in turn could contribute to debt problems from overspending.

Plastic cards are often charged for making withdrawals from cashpoints and there are also loading fees to consider, which are added in addition to the exchange rate.

Holidaymakers could find themselves spending over budget, not just because they do not know about loading fees but because they may not show up on a statement.

Settling a bill in sterling instead of the local currency also incurs extra charges as this is dynamic currency conversion.

Exchange rates vary between currency outlets and not looking around for the best deal can lead to a holiday costing more.

Research by consumer watchdog Which? has found that bureaux de change at airports are the worst places to buy foreign currency, giving the least value for money.

Even at the Post Office, people could overspend by choosing to purchase their currency in-branch instead of going on to the internet.

A final matter to consider is communication while overseas in the form of roaming charges for mobile phones - even if they are not used.

Comparison service uSwitch has found that 66 per cent of people could be bringing extra costs on themselves just by leaving their phones on when they are abroad and warned that even receiving a voicemail could incur a charge.

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