Saving money for a holiday

Putting your holiday on a credit card can add hundreds of pounds to the cost. Save up for it and you’ll come home relaxed, not restless with money worries.

Cash or credit card?

Saving up for a holiday and paying for it with cash is usually the best option for your finances.

But if you can save up the full amount in cash, paying for your holiday with a credit card might be a good idea as it’s likely to be protected under the Consumer Credit Act.

This means you may be able to make a claim if the airline or holiday company goes bust or the holiday isn’t as described. But you may already have similar protection if your holiday is covered by ATOL.

Paying by credit is only a good idea if you pay off your bill quickly and in full with the cash you’ve already saved up. Otherwise, you could be paying hundreds of pounds extra in interest. Some travel firms also charge you a fee for using a credit card to pay for your holiday.

This chart shows how a £1,700 family holiday could cost you over £300 extra if you pay by credit card but don’t pay in full when your next statement arrives.

If you’d rather have that £300 to spend on your holiday, follow our steps to a better deal.

Cost of your holiday*

*Assumes credit card rate of 19% pa (APR) and 2.5% fee for paying by credit card.

Step 1 – Set a budget


This will stop the cost of your holiday spiralling out of control by avoiding ‘extras’ you haven’t planned for.


List all the things you’ll need to buy, including:

Then estimate the amount you’ll spend each day on:

  • food and drink
  • travel
  • entertainment
  • holiday treats

Add these costs together and you have your savings goal.

Step 2 – Start saving

Did you know?

Research shows that people who treat saving as a regular expense are more likely to reach their goals than people who try to save whatever is left at the end of the month.

Source: ‘Transforming Financial Behaviour: Developing interventions that build financial capability’, CFEB (2010)

You don’t miss what you don’t have. Treat saving the same as paying a bill, and commit to saving a regular sum each month or week.

But be realistic - it’s better to commit to a small, manageable sum than to try too hard and give up.

Not sure you can afford to save? Start small by putting spare change into a jar each week. If that works, set aside a bit more on a regular basis.

Use our savings calculator to see how long it might take to reach your goal of a credit-free holiday.

Name your goal

Whether it’s a family trip to Tenerife or a romantic break in Rome, naming your goal will keep you motivated.

Try labelling a separate savings account with the name of your goal, or sticking a chart onto the fridge – whatever will help you keep track of your progress.

Step 3 – Stash your savings

Top tip

Set up a regular payment (direct debit or standing order) to transfer a set amount into your savings account each month.

It’s time to start thinking about where to stash your savings.

You might start with a coin jar, but make sure you transfer your money to a savings account when it builds up to a tidy sum. This way, you can earn a bit of interest on top.

Your bank account may let you set up a separate pot for your holiday goal online, so check if this is possible. Otherwise, you might be able to open an instant access savings account.

Price comparison websites

Comparison websites are a good starting point if you want to find a savings account tailored to your needs.

We recommend these websites for comparing savings accounts:


  • comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • it’s also important to do some research into the type of product and features you need before buying anything or changing supplier.

Step 4 – Watch your savings grow

Check your savings regularly to see how you’re doing. Set yourself small targets along the way and treat yourself as you hit each milestone.

When you reach your goal for this year’s holiday, set a new, higher target for next year until all your trips are credit-free. And remember to take your money-saving habits on holiday with you.

You should review your savings account often to check you’re getting the best interest rate.

Make sure you use as much of your yearly cash ISA allowance as possible so you don’t pay tax on the interest you earn. Many ISAs tempt you with a bonus introductory rate but then fall back to dismal rates.

Did you find this guide helpful?