Top tips for gap year travellers

Travelling is the perfect way to get over the stress of A-levels and university finals and more and more young people are choosing to see the world before starting work.

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However, they could find themselves in hot water if they fail to plan financially for their big trip.

Peter Harrison, travel money expert at moneysupermarket.com, said: "A gap year is a great opportunity to see other parts of the world.  But such a big adventure requires careful financial planning.

"Taking time to sort your travel money out now could make all the difference – no one wants to have to cut their trip short, or worse get stranded with no money, just because they didn’t plan properly."

Here are some tips to ensure you have the travel experience of a lifetime – and not an extended holiday from hell.

Financing your trip

For most young people, saving up for a big trip like this will take a while, so it is crucial to find the best possible savings account.

And even though interest rates are low, the chances are you will still earn more from a savings account than a current account so if you’ve already got your money saved up, it’s worth keeping it in savings account until you need it – if you opt for an internet account you’ll be able to transfer money over to your current account as and when you need it.

Intelligent Finance, which is part of Lloyds Banking Group, is paying 2.85% on its iSaver account, while the Principality BS e-Saver Issue 2 account is also paying 2.85%.

For those who can’t wait to save up and would prefer to pay for their travels once they return, the options available include a current account overdraft and a credit card.

Those finishing university are likely to have an account with a cheap overdraft facility already set up, so they may be able to use that.

School leavers may find it harder to get an overdraft, however. The best bet for them is therefore to contact their current account provider directly to see if they can arrange a borrowing facility.

Credit cards can be another good way to access the extra cash you need, although again some gap-year travellers may find it hard to get one – lenders have clamped down on who they’ll offer credit to. If you have no credit history or are not earning you may struggle to be accepted for a card. If this is the case, then convincing your parents to add you as an additional user on their card is one solution.

Spending while you are away

Credit cards:

If you are planning to use a credit card while travelling, it is vital to choose one that does not penalise you too heavily for overseas spending.

Common charges include foreign currencies loading fees, which tend to be between 2.5% and 3.0%, and cash withdrawal charges that typically come in at about 2.5% of the amount withdrawn.

One of the best options for travellers is the Santander Zero Card (formerly the Abbey Zero Card).  It has no foreign exchange loading fee anywhere in the world meaning you always benefit from the best exchange rate, and there is no cash withdrawal fee either. However, if you plan to use the card for withdrawals bear in mind that there is still a cash withdrawal interest rate of 27.9% - even if you pay off your balance in full.

Another alternative is the Post Office Credit Card. Though it doesn’t offer fee free withdrawals like Santander – it charges a 2.5% fee – there are no foreign exchange loading fees anywhere in the world. However, avoid using the card to withdraw money from a cash machine – you’ll be charged a 2.50% withdrawal fee (with a minimum charge of £3.00) and incur interest at a rate of 24.9% (compared with 16.9% for purchases).

When it comes to cash withdrawals, debit cards are a better option than credit cards. You will probably still incur overseas loading and cash withdrawal fees but there will be no interest to pay.

Debit cards:

The cheapest debit card to use about is the Nationwide FlexAccount Visa Debit Card. It has no loading fee within the VISA Europe Region and also offers fee and interest-free cash withdrawals. However, those travelling further afield should note that, outside Europe, it too carries a 0.84% loading fee that is set to increase to 1% in July.

If you’re travelling abroad to work in a single place, it may be worth opening a current account with a local bank – not only can you pay your wages in but you’ll also avoid foreign usage transactions levied by UK providers.

Prepaid cards:

Pre-paid cards offer another, secure alternative to carrying large amounts of cash around. Money is loaded on to the card, which can then be used for spending in the same way as credit or debit card. Prepaid cards are really popular with gap year travellers as parents can also load money onto the card if their’ son or daughter needs an emergency bail out while they’re away.

However, fees and costs vary so it’s worth looking into the charges before you purchase a card. Also most cards are available in dollars or euros so are only suitable if you’ll be travelling in the States or Eurozone.

FairFX’s Euro Currency Card and Dollar Currency Card are two of the cheapest prepaid cards on the market. They have no spending or foreign loading fees, with cash withdrawals coming in at €1.50 or $2.

If your travels will take you beyond the dollar or eurozones, Caxton FX is the only provider to currently offer a Global prepaid card. However, unlike euro and dollar cards which convert your sterling at the time the card is loaded, the money held on this card isn’t converted until a transaction is made. A conversion fee of 2.50% is charged for each transaction as well as a transaction fee of £2.50. You’ll also be charged a withdrawal fee of £1.50 if you use the card to take money out of a cash machine.

Insurance

Travel insurance is essential for anyone going travelling, yet around 20% head off without it. While you may not think that you have much of value in your rucksack, what about the cost of replacing your i-pod or camera and if you have to visit a doctor, even if it's only for a minor ailment, it could be costly.

With gap year travel becoming increasingly popular, there are now specialist travel insurance policies that cater for this market - a standard annual policy will not be suitable as most cap the number of days you can be away for at any one time. The maximum is usually 31 or 45 days.

It is also important to check what sports and hazardous activities are covered. Bungee jumping, scuba diving and white water rafting are popular with gap year travellers but not all insurance policies cover them. If you plan to do any winter sports such as skiing or snow boarding you will also probably have to pay extra.

Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.

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