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 Best way to pay for your cruise

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Sailing on the high seas gives you plenty of opportunities for relaxation, adventure and fun under the sun. Cruises offer travellers the chance to see a number of different destinations as well as enjoy a taste of glamour.

However, it is well known that cruises often come with hefty price tags attached to them. While there are “budget cruises” available, these are still a lot more expensive than other types of holiday and a luxury cruise can run into tens of thousands per person.

As such, travellers headed out on a cruise will want to ensure that at least they don’t incur costs in paying for the trip. However, paying for foreign travel usually comes with foreign transaction fees attached which can seriously add up.

In this post we will look at the most cost effective way to pay for a cruise.

Booking a Cruise Via a Travel Agent

The internet revolutionised the way in which travellers pay for their trips by connecting customers directly with airlines, hotels and tour operators cutting out the middlemen (travel agents) and ending their effective, long standing and lucrative monopoly.

Still, there is a place in the market for travel agents and it remains fairly common to book cruises through travel agents or specialist cruises companies who organise the “full package” of flights, transfers and the cruise itself. These companies usually have offices based in the country where their clients are based. If you are looking to book a cruise via travel agent or tour company then they will bill you in your domestic currency and paying for it will be the same as making any other large purchase.

In this case much of this article will not apply to you except for questions of making payments and purchases at destination.

If on the other hand you are paying a cruise operator based overseas then you could potentially save a lot of money on the booking by paying attention.

Bank Transfer

In our day to day routines, we rarely ever pay for anything by way of bank transfer. Afterall, they take time to arrange and debit cards or payment apps are perfectly effective.

However when it comes to making large international payments, making an international payment by bank transfer can prove very wise. While banks do charge fees on international payments, they can sometimes by significantly less than with other methods.

When a bank sends money abroad, it charges a transaction fee. These fees vary greatly depending on the particular bank and the destination country but in the US the scale ranges pretty wildly from $2.75 – $50.00.

Additionally the recipient’s bank will also charge a fee and the customer booking the cruise will be required to pay this. Also, if an intermediary bank is needed (such as when two banks do not have a direct relationship), they will also charge a fee so it is vitally important to check the fee position with your bank’s foreign payment helpdesk before committing.

As well as charging a transaction fee, banks also apply a “mark-up” on foreign exchange. This means that rather than changing the customers local currency into the foreign currency at the market rate, they use their own rate which costs their customer more and allows them to make some (more) profit on the transaction. Once again, banks foreign exchange mark-ups vary between institutions but the range is pretty stable between 2% – 4%.

Let’s break this down with an example;

Price of Cruise = $8,000

Bank Transaction Fee = $20

Foreign Bank Transaction Fee = $12.50

Foreign Exchange Mark Up (3% on $8,032.50) = $240.97

TOTAL COST = $8,273.47

As you can see, in this example paying for a cruise using a bank transfer could cost an extra $273.47. Lets now see how this compares to paying on a credit card.

Credit Card

Now let’s look at what it can cost using a credit card abroad. Credit card providers often try to entice travellers into using their card to pay for travels by offering extras and relatively reasonable fees.

Often, credit card providers charge a percentage of any transaction that includes both the network fee, and the foreign exchange mark-up. While some accounts offer zero-fee international transactions the market medians are around 2.75% – 3%.

Revisiting our example, a 3% charge on $8,000 would be $240 and so the cruise would cost $8,240. As you can see, that is slightly cheaper than using a bank transfer but if the credit card balance is not cleared in full by the due date, interest of 15% – 20% (or more, will be added.

However, for day to day expenses at the various cruise destinations, using credit cards internationally can be a reasonable and efficient way to pay for things. As an alternative, pre-paid travel cards are a good option as these often come with ‘zero-fee’ on foreign card payments incentives.

Debit Card

Unlike credit cards, debit cards often carry two separate sets of fees for international use. Many banks charge a percentage for overseas card payments which often comes with a minimum amount of between $2 – $3. Furthermore, banks also apply a foreign exchange mark up just like they do with bank transfers.

Using a debit card to pay for a cruise booking could prove pretty costly and using a debit card to pay for at destination expenses (such as coffee) could prove disastrous as the minimum fee can often exceed the value of the item being purchased! Additionally, it is wise to try to avoid making at destination ATM withdrawals using a debit card and a better option is to withdraw cash at home and then change  it locally on arrival. In short using debit cards internationally is seldom wise.

Final Thoughts

To recap, the single best way to pay for a cruise booking is either by bank transfer or a credit card (if you can pay the balance in time). Both have fees attached but they are actually quite similar on balance. When it comes to ‘at destination’ spending’, a combination of good old cash, credit card and prepaid travel cards could help enable a cruise passenger to make good savings.