Skip navigation’s guide to paying for your holiday on plastic

close up of a credit card chipThe benefits of using your credit card to pay for that much needed break

In need of a holiday? Aren’t we all! Whether it’s a beach break, a city escape or a week in the snow, planning where to go and what to do takes time and effort.

But the hard part still isn’t over. How are you going to pay for it? Should you really be using that credit card? looks at the benefits of paying with plastic for that much needed break…

What if my travel agent goes bust?

With the economy in hard times, it’s hard to know if your travel agent will still be in business by the time you go away.

A spate of companies have gone bust in the last year, including big names such as XL, and most recently Flyglobespan, Scotland's biggest airline. Collapses such as these leave hundreds, sometimes thousands of tourists stranded and many more unable to take their planned trip away.

So when you’re booking your holiday, how do you know if you’re covered or not?

Thomas Cook announced in 2009 that it will cover the cost of any holiday should they go out of business. But if you’re not holidaying with them, what do you do?

Book a package holiday through a travel agent or tour operator and you’ll be protected by ABTA or ATOL should the company go bust. But if you purchase the flight, hotel or car hire separately through a travel agent, tour operator or website, you won’t have the ABTA/ATOL safety net as they only protect package deals.

The benefits of buying a holiday with a credit card

The good news is you can get extra protection by using your credit card to book your trip.

Under Section 75 of the Consumer Credit Act 1974, both the credit card provider (the lender) and the group you’re buying something from (the supplier), are responsible for the purchase if things go wrong.

This extra protection means if you book flights or accommodation directly with a company that isn’t covered by either ABTA or ATOL and it goes out of business, you’re likely to get a refund.

Section 75 covers the purchase of all goods and services costing between £100 and £30,000 bought using a credit card. So why not make the most of the extra protection and pay by plastic for other holiday-related purchases – such as travel insurance?

For more information, see’s Guide to Section 75.

Overseas charges

Credit card providers typically charge a commission fee of around 2.75% on each foreign transaction made. This can add up to a significant sum over the course of a holiday.

Cards that don’t charge you for purchases made abroad are becoming increasingly rare, but there are still some around. Using one is likely to be cheaper than using your debit card.

If you do have to pay charges, you may want to consider paying for everything (including the holiday) with a cash-back credit card.

The best deals in this area give you 5% cash back for spending up to a certain limit for the first three months. After that, you’ll receive between 0.5% and 1.25% back, depending on the total value of transactions made.

You could always put the cash you get back towards the cost of your next trip. See’s Guide on How to Make your Credit Card Work for You.

Finally, do remember that every time you use a credit card, you build up debt – and this money, of course, has to be repaid. For tips on managing a credit card and avoiding debt problems, take a look at Tips on Using Your Credit Card Responsibly.

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