Unless you are from Scandinavia then yes, Iceland is a pricy destination. Gas is expensive, food is expensive, accommodation is expensive, going out for a beer is expensive. Basically all aspects of Iceland is most likely at a higher price level than you are used to. However, there are ways to save money on your trip to Iceland.
It is not as expensive as it seems!
Eventhough Iceland will never become a budget-travel destination, there are some aspects of Iceland that makes it less expensive than it seems at first sight:
Shop Tax Free
When you spend 6000 ISK or more on a purchase you qualify for Tax Free, which means that you can have your purchase validated at the airport before checking in and get up to 14 % of your money back.
Remember to ask for Tax Free when shopping and the store will give you a form that you need to fill out and hand in at the airport. Don’t forget to go to the Tax Free desk before checking in your luggage. They might want to see some of your purchases as a routine inspection, so make sure to pack it on top in your bag.
Prices may seem high when you go to a restaurant, but remember that you don’t tip in Iceland. Also, there are no hidden costs or other taxation. In other words, the prices on the menu are exactly how much are going to get charged and not a penny more. Same goes for shopping etc.: Prices on the tags are the actual amount you will be charged.
How to save some money while in Iceland
There are ways to make your trip to Iceland a bit cheaper:
Pay by creditcard
Iceland is a very cashless society. Everybody pays with creditcards. Even when you buy a hotdog, visit some of the small fishing villages outside of Reykjavík or go to remote hiking camps they accept creditcards.
This means that you don’t need to run to an ATM all the time, which saves you the fees applied when making withdrawals.
However, you need cash when using restrooms in some locations when you are off sightseeing in the country side. At popular sights and camps in remote locations it is customary to pay 200 or 500 ISK cash to use the facilities.
Drink tap water
Iceland has some of the finest drinking water in the world. As such, there is no need to buy bottled water! Unless you specifically want a soda, beer or wine with you meal, you can always ask for a glass of water and you will get it free of charge. Alcohol is quite expensive in Iceland. If you are able to go sober for your stay you can save a lot of money.
In fact, most restaurants and cafés have a corner with fresh, chilled water and glasses so you can easily help yourself.
Day trips are pricy but totally worth it! However, there are experiences in Reykjavík that are available to you free of charge. For instance City Walks offers a free walking tour around the city and at The Secret Cellar comedy club you can get a laugh for free every night.
Go grocery shopping
Rent an apartment or room on AirBNB or choose an apartment hotel that offers a room with a small kitchen, which will enable you to cook meals at “home”.
Chances are that your itinerary is packed with activities from early morning to evening, so you might not even have energy to go out for dinner all the time. Go grocery shopping at Bónus, which is the discount super market, or Krónan (the one in Grandi at Fiskisloð is the best). Avoid shopping in 10-11 if you want to cut costs.
Eat breakfast at “home” and make a lunch pack for when you go hiking and on day trips.
Choose less fancy accommodation
Who doesn’t love a nice hotel? However, chances are that you won’t be in you hotel that much while in Iceland, since you will be busy checking out the gorgeous country side. Thus, it is a good idea to save some money by simply choosing a less fancy place to stay.
However, if you wish to stay at a relatively central location in Reykjavík it can be recommended to stay West of Kringlumýrabraut and North of Miklabraut.