Holiday to Tenerife could take 10 years to pay off
The warm glow you get from a holiday to Tenerife might last for a month if you're lucky, but for some people, the debt they run up booking their holiday could last an incredible 10 years.
A week in Tenerife doesn't sound like the kind of dream holiday that's beyond the reach of ordinary mortals. Twice-bankrupt Kerry Katona was lapping up some winter sun there in January, and a survey recently found that it was one of the most searched-for destinations by British holiday makers - after Benidorm.
However, there's every sign that regular overseas holidays are becoming the kind of luxury that many of us can no longer afford. In order to get our week in the sun we're having to put more and more of it on a credit card.
A survey by TotallyMoney.com in the middle of the holiday booking season found that this year we'll put 8% more of the holiday spend on a credit card - racking up a collective bill of £9 billion. Worryingly it means that more than a quarter of everything spent on overseas travel will be put on a card.
Even more alarmingly, the survey also found that 11% of people will only make the minimum repayment on their card, so a £1,232 trip to Tenerife for a family of four could take 10 years and four months to pay off - attracting an incredible £919 in interest.
The more you spend on the trip, the more alarming the figures become. TotallyMoney calculated that if you blew £3,561 on a trip to New York, it would take you over 16 years to repay - with interest of over £3,000.
Unfortunately the experts are clear: the sensible answer is to wait, and take a break from overseas holidays for a year while you build up the savings you need to afford a holiday without going into debt.
However, there is an exception which could see you on a sunny beach this year. You can use an interest-free credit card to spread the cost. So, for example, Tesco and Santander are currently offering 0% deals on purchases for 18 months. If you have the discipline to ensure you repay the money in full by the end of the interest-free period, you can take a break this year, without paying the price of excessive interest.
It has the added advantage that putting the holiday on a credit card actually provides vital protection. If your break is not ATOL protected, the credit card gives you the security of Section 75 insurance if problems occur or the company goes bust. It means you can claim the cost of the holiday back from the credit card company and it's up to them to chase the business for a refund. This covers purchases for between £100 and £30,000.
Of course, in an ideal world you could put the holiday on a credit card, and then pay it off in full by the end of the money - offering you the protection without the debt. If you have the funds to do this, you could even put it on a cashback credit card, such as the American Express Platinum which will earn you 5% on the first £2,500 spent in the first three months and 1.25% thereafter.
