4 Mar 2019

Should I use a credit card for my holiday?

There are three main reasons why you might use a credit card for your holiday: to borrow money, protect your purchases, and access your money abroad. Here’s what you should consider before you decide to use one.

Should I use a credit card to pay for my holiday?

It’s usually better to save up for a holiday. But you might consider using a credit card to take advantage of cheap flights and deals by booking in advance, before you’ve saved up enough to pay up front.

If you’re thinking about borrowing money for your next break, here are a few things to be aware of:

Is it cheaper to use credit or wait?

There’s no simple answer. It depends on how fast the price of your holiday goes up, how much by, and what you pay to use credit.

Try estimating costs by:

  • Tracking flight prices with Google Flights
  • Using an app to predict flight and hotel prices, such as Hopper
  • Browsing credit deals on comparison sites – just remember that you may not get the advertised rate (the representative APR)

How much interest will you pay?

Even though you could stand to save money by taking advantage of deals when you see them, once you factor in the interest you’ll pay for borrowing money, you could actually end up spending more than you would if you just saved up and waited.

Many lenders use compounding to calculate interest. This means that any interest you owe is counted as part of your debt and can rack up interest charges itself. So, the longer you owe money, the more the debt will grow by itself.

Can you avoid interest?

Interest on credit cards is usually calculated on a daily basis and charged at the end of the month. But many lenders give you a one-month grace period. This means they won’t charge any interest if you pay off all the money you borrowed within the same month.

Is it the right type of credit?

Credit cards tend to have higher interest rates, meaning they’re more suitable for borrowing over the short-term. If you want to take out credit over the long-term, you may be better off with a loan.

Can you afford the repayments?

Only use credit to buy your holiday if you’re sure you can repay it. Otherwise you risk getting into more debt due to interest charges. You can also damage your credit score and get into legal trouble by missing repayments.

Does using a credit card give me extra protection?

Holidays aren’t cheap, so it’s important to get your money back if something goes wrong – like if your flight is cancelled or your hotel isn’t up to scratch.

You get extra protection on purchases between £100 and £30,000 when you put them on a credit card (but not a debit card). This is one of your rights under Section 75 of the Consumer Credit Act.

Extra protection means you may be able to get a refund through your lender, rather than the seller. This can be useful if the seller doesn’t cooperate or respond, or if they’ve gone bust. Note that package deals are normally protected under the ATOL scheme.

Just be aware, you may get stung with credit card fees for booking a holiday in a foreign currency – we look at this in more detail below. Finally, remember to pay off your credit card quickly to avoid paying interest.

Accessing your money abroad

Stashing wads of cash in your suitcase isn’t exactly safe. So you probably want a card to access money while on holiday.

Most debit and credit cards charge a fee for withdrawing or spending money abroad. You may even be charged for a holiday purchase before leaving the UK if it isn’t in pounds sterling (like a hotel booking).

What’s more, your lender may not give you the best exchange rate. A poor exchange rate means you get less for your money.

Luckily, you may be able to find a less expensive option. For example:

Travel credit cards

These are designed to be used abroad, so they normally don’t charge for withdrawals or transactions. You may also get a better exchange rate.

Just remember to pay off the card quickly to avoid paying interest. It’s also worth noting that applying for a new credit card will temporarily lower your credit score.

Prepaid travel cards

Like travel credit cards, these usually offer a good deal for overseas transactions, withdrawals and exchange rates. The difference is they aren’t a form of credit, so you won’t be borrowing money to use them. Instead, you load them with money before you go on holiday.

Your Monzo card

You can also use your Monzo card abroad. You can withdraw up to £200 every 30 days for free. There’s a 3% charge after that to cover our costs. We also pass on the Mastercard exchange rate without adding any fees.


For more tips on how to save and budget better, head to Monzo Money Tips👇

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