12 Money Saving Tips for Traveling to Iceland

Traveling to Iceland will bring you to some of Earth’s most unique and remarkable landscapes. Unfortunately, it is also going to result in your bank account taking a pretty big hit.

Iceland has garnered a reputation as being expensive, and this is one of those times where everything you read is true. So, when I sat down to start writing my first post on Iceland, rather than write about all the amazing places we saw, I decided to share my money-saving tips instead. We all know Iceland is great, yet if you can’t afford it, what’s the point in another write-up extolling its virtues?

Make no mistake, Iceland is well worth the costs, but that doesn’t mean you need to totally break the bank. Here are some of my top tips to keep that from happening!

Disclaimer: This post may contain affiliate links. If you make a purchase through one of these links, I will earn a small commission. This occurs at no added cost to you

Why Iceland is Expensive

Iceland is an expensive country for several, mostly interconnected reasons. I won’t attempt to explain all of Iceland’s economy (you’re welcome), but I do think it’s helpful to at least know why you’re spending so much. If you’re interested, you can read more about why traveling to Iceland is expensive here.

• Iceland’s small size and isolation from the rest of the world result in high importation costs and tolls. Additionally, Iceland has to import a large portion of its goods because its geography does not support the raw materials needed for production of goods and feeding its population.
• There are only a handful of companies that run many of Iceland’s primary economic sectors. As a result, they’re able to dictate prices with little competition.
• Iceland has high taxes to support its welfare system and infrastructure. Taxes are also high because of the relatively high standard of living Icelanders enjoy.
• Tourism drives up prices, too. Property values increase, restaurants rise their prices, tours charge more, and so on and so forth.

Do Your Research Before Traveling to Iceland

Buy a good guidebook and study it before you leave. Doing so can allow you to visit Iceland without the need of any guided tours. While a tour is convenient, it is an added expense you don’t need.

By having a thorough itinerary in place, you can research histories, opening hours, costs and other helpful visitation tips well in advance to help your trip go smoothly. You may miss some anecdotal information that only a guide can provide, yet a lot of the basic essentials of a tour can be found in good guidebooks and well-reputed websites.

We did two tours during our week-long visit to Iceland: A walking food tour of Reykjavik and a tour of a lava tube that can only be done with a guide. The food tour was fun, educational and interesting. Nevertheless, much of the information our guide presented was things I already knew from my earlier planning. It was nice to have it reiterated with a personal touch from someone who lived in Reykjavik, but if we were on a tighter budget, it was something that could have been skipped.

I wrote out my tips to planning a well-researched trip in an earlier post. Give it a read for more help with putting together the perfect trip!

Reykjavik’s Happy Hour Scene

Alcohol can be incredibly expensive in Iceland. An easy way to save money on booze while in Reykjavik is to take advantage of the city’s many great happy hours. It seemed like every bar worth its weight in beer had specials during the happiest of hours.

We saw some truly great happy hour specials during our couple days in Reykjavik. One of the best we found was in Hús Mals og Menninger, a delightful bar in a book shop for you bibliophiles out there. Their happy hour offered beer and wine at prices comparable to what is typically found in America.

You can also find some places offering happy hour for longer than what you’d normally find in America. We saw at least two bars whose happy hour lasted the better part of the afternoon.

Keep an eye out for these specials, and plan to do any drinking before happy hour ends to save a few bucks!

Duty Free Shopping at Iceland’s Keflavik Airport

If you know you’ll be having any alcohol, consider purchasing some of what you’ll need at Keflavik Airport’s duty-free store when you arrive.

One of the major reasons alcohol is so pricey in Iceland is because of how much it’s taxed. The duty-free store at the airport lets you bypass this.

It will still be more expensive than you may be used to back home, but it will be cheaper than bar hopping.

Enjoy the Delicious Icelandic Water

Iceland is rightfully proud of its pristine water supply. One of the first things you’ll see as you arrive in Keflavik Airport, is a sign by the bathroom proclaiming the drinkability of their tap water.

Take advantage of this fact to save some of those precious dollars. You can refill your reusable bottles at any sink with Iceland’s pure tap water without fear of getting sick. Don’t worry about the sulfur smell you sometimes get. Much of Iceland’s water is heated geothermally which imparts that rotten egg smell. You’ll get used to it!

Further, if a restaurant tries to have you pay for water, just ask for tap water instead. And if they still don’t offer you free water, grab your reusable bottle, fill it in the bathroom and drink from that.

To Tip or Not to Tip

It’s sometimes hard for Americans to understand because tipping is ingrained in our culture, but tipping is not needed or expected in Iceland.

Unlike in America, Iceland’s food and service industry employees are all paid livable wages. They don’t need tips to make ends meet. In fact, most places don’t even offer an option to tip. You may see tipping jars occasionally, though.

If you received exceptional service and you really want to tip, you can, but save your money for something else instead.

Use the Grocery Stores

Throughout Iceland are a number of grocery stores where you can purchase affordable meals and alcohol. You can use these to avoid some of the high costs at Iceland’s bars and restaurants.

This money-saving tip will come in particular use when you’re out in the country away from Reykjavik. Besides bars and restaurants being less common in some of these more remote areas, they also tend to be more expensive than in the capital city.

Rather than spend a small fortune on multiple meals, pick something up from the grocery stores whenever you get a chance and save it for later. Besides, what could be better than a meal with a view of one of Iceland’s majestic waterfalls or volcanic landscapes?

Three of the most common markets are Bónus, Krónan and 10-11. Of the three, Bónus is the cheapest and 10-11 is the most expensive. You can easily spot Bónus stores by the large pink pig on their signs.

Do the Math When Shopping in Iceland

This money-saving tip isn’t the most exciting, but it can be helpful.

Iceland’s currency, the Icelandic króna, is drastically depreciated compared to the U.S. dollar. In other words, the ratio of króna to dollars is huge. In fact, one USD equals 137 ISK at the time of this writing.

Because of that, it can be difficult knowing just how much money you’re spending when you see those large numbers. It starts to feel a bit like Monopoly money. Checking the conversions every now and then is a good reminder of what you’re actually spending.

Travel to Iceland During the Off Season

Accommodations, tourist attractions, bars and restaurants all tend to be cheaper during the offseason for tourism. Traveling during this time is an easy to save a decent chunk of change.

You also get the added perk of getting to visit Iceland without the crowds of peak season. However, there are some drawbacks to consider. Because Iceland is so far north, days are shorter and the weather won’t be as nice. Also, many attractions, restaurants and bars may be operating under reduced hours due to less sunlight and less demand.

Iceland’s peak tourist season is from June to August. The farther you get from these three months, the better your chances at finding reduced prices with one big exception. Tourism starts to pick up again around the Christmas season which also results in increased prices.

Book Accommodations in Iceland Early

Like most places, booking your Icelandic lodgings well in advance is an easy way to save money. Hotels tend to raise their rates the closer it gets to the date of your visit.

Additionally, waiting to book a hotel will limit what is available to you. When you search at least a few months early, you’ll have a much wider selection to choose from at different price ranges. If you wait too long, the cheaper options will likely be sold out.

Still another reason it pays to book early is because it locks in your rate at what will likely be the cheapest rate. Unfortunately, things rarely get cheaper, and hotels are no exception to that rule. Make reservations once you know you’ll be visiting to avoid the possibility of a price hike.

Get Your VAT Refund

Some of your purchases may be eligible for a value-added tax refund (more commonly known as a VAT refund). The VAT is typically 24% on souvenirs!

VAT refunds are a way to get that money back. It is a bit of a runaround to get your refund, but if you buy a lot of souvenirs, the hassle can be worth it. The process for getting the refund is listed below.

1. Have the shop’s clerk fill out their portion of the paperwork
2. Fill out the refund slip that you received
3. Present this paperwork, the purchasing credit card, the purchased goods and your passport to the VAT counter in the airport

Seems simple enough so far, right? There are a few conditions, too.

• Purchases must be from one store and cost more than 6,000 ISK; you can’t combine purchases from multiple stores
• You’re not supposed to have used or opened the products you are leaving the country with
• You may need to show the shop your passport at the time of purchase
• The purchased items must be taken out of Iceland within three months of being purchased

Okay, okay. Maybe it’s not as much of a runaround as I mentioned above. Keep in mind, though, that it might be a different story when you’re trying to get through the airport after an exciting yet exhausting visit to Iceland.

Avoid Dynamic Currency Conversion

Dynamic Currency Conversion is supposed to be a convenience offered to let you see your charge in dollars. In reality, it’s a bit of a con.

The conversion comes with poor exchange rates and other fees that result in you paying more than you would in the local currency. Either do the conversion in your head or just go with the flow. Whatever you do, never pay for this conversion!

Remind Yourself Why Taxes in Iceland are High

When all else fails, remind yourself of two of the reasons prices in Iceland are so high. First, the high taxes that accompany goods here go towards maintaining Iceland’s infrastructure and providing a strong welfare system to its citizens. Second, Iceland’s employees all earn livable wages. Prices reflect the need to pay these workers.

So, while it may be tough on your bottom line, that money is going to good causes. It might not benefit you directly, but it helps ease the burden a little knowing that someone else will get something out of your purchases.

Thank you for reading this post. Paul Passing Through is a labor of love to which I’ve dedicated a lot of free time. If you’d like to show your support for my blog, you can Buy Me a Coffee to help fund the future of Paul Passing Through. I appreciate any contributions!

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