If there is anything we've learned from Thomas Cook going bust, is that no business is 100% safe. The value of ATOL protection has only increased since the failure of Thomas Cook, and even though some people are still happy to book separately, there is one thing we can all do to increase our protection - even if ATOL protected - and that's to use a credit card.
People are even more wary about protecting their purchases now. Especially those people, including myself, burned by the failure of Thomas Cook.
Consumer Protections
There are plenty of credit cards that give rewards, but they're generally pitiful. I know some people do enjoy racking up points or miles, however the best benefit to using a credit card is the "section 75" of the Consumer Credit Act. This means that your credit card company is equally responsible (and liable) with the seller if there's a problem with your purchase, or the company fails.
We've had readers tell us (the ones that have had their ATOL refunds) that they're missing money because they've paid for parts of the holiday (like extra seats, tickets bought elsewhere etc) not covered by ATOL that they didn't realise wasn't protected. If you paid for seats separately (which is what we did) they are NOT covered by ATOL, but if you paid by credit card (like we did), you call your bank, explain the situation and get it refunded.
Credit Card Fear
I am aware that some people are completely against credit cards, but if you use a credit card correctly, they can benefit you greatly. If you know you're not great with finance, or you think your willpower will be tested knowing you have a credit card with balance available, then instead of getting one yourself, ask a family member or friend to make the deposit payment for you and give them the money directly. This is why I have done for family members when they book their holidays.
Never Pay Interest
When opening a credit card, setup a direct debit to pay the full balance each month. Or if you have the time, after you make a payment (and it clears) call up or go online and pay it off right away. If you pay your credit card off each month (either by direct debit or directly) you'll never pay a penny in interest.
Why Do Credit Cards Get This Protection?
There a couple reasons. Firstly, you're paying with credit (debt) and the credit card provider is equally responsible (and liable) with the seller if something goes wrong. Also, hidden to consumers, credit card fees for merchants are higher than debit cards. These fees sort of have a stealth insurance for this protection hidden in these fees. This is why back before it was made illegal, you usually had credit card fees, now those are gone using a credit card is a no-brainer. Finally, you get charged interest if you don't pay your balance off within a month. Money they cannot get through debit cards. Credit card companies gamble on this happening to make money.
The Grey Areas
Using a credit card for protection isn't a sure thing, but it does give the maximum amount of consumer protection available to you. I know many readers who panicked after Thomas Cook went bust went right to their bank to ask for a chargeback on their credit card to only have it denied because they had to try and claim through ATOL first.
Another grey area is booking flight only. Booking a flight through a third party might not be covered, that's because your contract is between you and third party, not the flight operator. If using a flight comparison site to find the best deals for flights, make sure you book direct for full protection. In other words, if you're flying Virgin, book through Virgin, if you're flying TUI, book through TUI. This does not apply of course if you're booking a full package that's ATOL protected.
What Do I Do?
You don’t need to pay the full price by credit card to be covered. As long a £100 of the balance is paid for by your credit card, the full balance is covered. So what I do, is try to get an ATOL protected holiday first. Some years it's cheaper to barter with a travel agent, other times it's cheaper to book it separately. I have usually always managed to get a travel agent price to where I want to be ATOL protected. Second, regardless of ATOL protection, I pay the deposit on my credit card. That secures the Section 75 consumer protection for paying at least £100 of my holiday balance. You don't need to worry if you don't or can't get a credit card limit that's enough to pay off your whole holiday, you just need to pay £100 of it. Which is easily done just paying your deposit.
Outside of my Disney trips, I always put purchases over £100 or more (especially online) on a credit card. There's too many stories of people ordering laptops online and the package arriving with the laptop missing and the box full of photo-frames instead. The direct debit clears the balance the next month. No interest was paid, and i'm fully covered.
For Emergencies
Outside of the consumer protections, having a credit card is good for emergencies, especially when abroad. I always take one with me, but make sure it does not have any international fees (see below).
Getting The Most Protection
To get the most protection, get a ATOL protected package holiday. Use a credit card to pay for at least £100 of your ATOL protected holiday. If not ATOL protected, then make sure you use a credit card, and always have full and proper travel insurance.
What Cards Are There?
While I cannot give financial advice, and have no financial interests in recommending anything specific in regards to travel credit cards, some of the cards that offer 0% international fees include Santander Zero, Tandem and Halifax Clarity.
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