A holiday on your credit card? What to pay for

With the holiday season looming, millions of Britons are turning to the Internet to book their annual fix of sun, sea and sand. The falling pound is hiking up the cost of a family holiday in Europe by several hundreds of pounds, so putting together your own "DIY" break is one way to save money.

But while booking low-cost flights and separately booked hotels on-line can slash the cost of a holiday, travel experts warn that doing so will not enjoy the same consumer protection as traditional package holidays, which are covered by Atol (Air Travel Organisers' Licensing).

One way to protect yourself against the separate elements of your break going bust, is to pay using a credit card. Your credit card company is then jointly liable for breaches of contract or 'misrepresentations' by your travel firms.

This is also true if your travel company goes out of business. In most cases you would be covered as long as the sum is more than £100 and the amount you put on your card less than £25,000.

Going abroad this year? Try our Travel Insurance comparison service.

How to pay for your holiday booking

Introductory purchase deals are a good way to pay for a holiday if money is tight ahead of pay-day. They offer a financial buffer zone, giving you a cost-free way to purchase a holiday but you must pay the debt off in full within the deal period.

Among the best on the market at time of writing are: HSBC Bank MasterCard - 0% for 12 months, then 15.9% APR; Halifax All in One MasterCard - 0% for 10 months, then 15.9% APR and Lloyds TSB Advance MasterCard - 0% for 6 months, then 11.9% APR.

Another way of clawing back a few pounds is to pay for your holiday with a cashback credit card. This type of card pays you back a percentage of your purchase each time you use it.

It's possible to earn 1% money back on all your spending and in some cases as much as 5% for an introductory period. Other cards enable you to generate points that can be redeemed for rewards such as flights and holidays.

Compare your existing credit card with the best on the market - see what you could save!

If you're looking at this kind of card, consider the American Express Platinum Moneyback Credit Card - 5% cashback for three months on spend up to £4000 pa. Then 0.50% on spend up to £3,500 per year; 1.00% on spend between £3,501 - £10,000 per year; and 1.50% on spend over £10,001 per year.

The Capital One Platinum Cashback MasterCard offers 4% cashback until 1/8/08 on spend up to £1,500 pa. Then 1.00% on spend up to £1,500 per month. Barclaycard Platinum Cashback MasterCard/Visa gives 4% until 31/07/08 on spend up to £750 per month, then 0.50% on spend up to £6,000 per month; and 0.5% cashback on supermarket and petrol spend until 1.1.10.

What not to spend on your credit card abroad

While credit cards can prove to be a holidaymakers best friend when it comes to booking a holiday, watch out for a sting in their tail on overseas spending. "With travellers' cheques becoming rather old fashioned now, more people are resorting to using their credit or debit card when they go abroad," adds Moneyfact's Michelle Slade.

"But holidaymakers need to ensure they're aware of the additional charges they will face for using their cards in a foreign country."

22 May 2008 © Moneyextra.com

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Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.