A fool and his money are soon parted.. not just the fools it seems

Posted by Jessica Searle in Personal Finance on 5 April 2013 - Jessica worked as a Credit Analyst at checkmyfile until 2013

As financial troubles hit throughout Europe, more holidaymakers are putting their spending money at risk by taking larger sums of cash with them to Europe. Due to fears over the ability to withdraw holiday funds, following bank closures and ATMs restricting amounts or completely running dry in Cyprus, c. Last Thursday, for example, following the reopening of banks in Cyprus, travellers were permitted to take only €100 out of the country.

Experts have urged – mainly concerning those heading to Cyprus, Greece, Spain and Italy - to check their insurance policies too, as insurers tend to cover only limited amounts of cash. Some will not cover spending money at all, others only up to a small amount, such as £150 with a £100 excess to pay.

Age can also affect your travel insurance policy. Travellers under 18 may only able to claim up to £25 if money goes missing whilst on a beach, compared to the £50 of over 18s. This is all very insurer-specific, some specialist policies may cover more, but you will have to enquire beforehand and possibly be subjected to an extra premium. As such, it is vital to read your policy if you are unsure on any points before jetting off, and do not leave it until after the holiday.

Regarding a claim, most insurers will want proof that you had the cash in the first place, so the receipt from the bureau de change is essential, a crime reference number from the local police if it was stolen will also assist greatly. If seized by the authorities at the airport due to a local law, you won’t be able to claim on your policy.

This is as the Financial Ombudsman Service warns that not even these proofs will not be enough for all insurance companies. “Some firms can be officious. Insurers can turn down claims because the money is locked in a suitcase and not in a safe,” says a spokesman. “One complainant took the trouble of photographing their cash in the hotel safe as a precaution. However, their insurer still would not pay up when the cash was stolen because they could not prove the money in the picture belonged to them... And even if you have a receipt showing a withdrawal, it can be hard to prove you didn’t spend it.”

The alternatives to cash can also present problems. Travellers cheques are currently advised to be avoided.

Credit cards, debit cards and pre-paid cards are your best bet, but you will always need some cash.

”It’s always good to take a mix of ways to pay for your holiday expenses”, says Bob Atkinson of travelsupermarket.com. “But if you take plastic, you may find restrictions. Bank transfers are frozen, so shops and services that rely on cash flow from credit card transactions may be insisting on cash.”

After a rather tumultuous time, Cyprus has finally secured a rescue deal for its banks, seeing its 'rich' savers – those with more than €100,000 (£85,000) — forfeit vast sums of their savings in exchange for bank shares.

Unfortunately this means for those of you heading to Cyprus on your jolly holidays, large amounts of cash is your only safe option. So keep an ever watchful eye on those pennies... euros... cash... whatever, and make sure that you spend it all, save perhaps just €100.

Jessica Searle is a Credit Analyst at checkmyfile and has a degree in English Literature from the University of Exeter. You can contact her at jessica.searle@checkmyfile.com

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