Fortunately for low budget tourists, the Icelandic currency takes roller coaster rides like no other. Before the banking crisis in Iceland, Reykjavik was along with Oslo and Tokyo the most expensive city in the world. When the banks finally crashed, the value of the krona plummeted and therefore consumer products and services in Iceland became much cheaper for tourists. So if you are planning on travelling to Iceland on a low budget, then now is the time and here are some helpful tips to make your journey even cheaper.
Airlines
For Europeans, travelling with Iceland Express should be cheaper in almost all cases. Book your flight with at least a few days ahead of time, the sooner you buy the ticket the cheaper it should be. They have made statements before, promising to begin flying domestically and have claimed they will instantly pull domestic flight tickets down by 30%, but they have not fulfilled this promise yet. If you travel with Icelandair, then look for offers and be sure to choose carefully between dates, regular fares and offers when you book with them on the internet, since the price difference can easily range over two hundred percent!
Cigarette's and Alcohol
If you are a smoker and/or drinker then remember to buy tobacco and alcohol at the airport. This can save a good sum of money for backpackers. Consumer products that damage health are heavily taxed in Iceland. Cigarettes cost 4 times more in Iceland than in the free trade zone of Keflavik airport. Alcohol is much cheaper in the airport as well, in fact the alcohol is sold under state monopoly. Tourists are allowed to bring a carton of cigarettes and 6 litres of light alcohol(beer or wine) or 1 litre of hard liquor(for example vodka) from the free trade zone to Iceland tax free.
Tax Free Shopping
f you are a foreign citizen and shop for more than 4.000 ISK, then you are eligible for a VAT(Value Added Tax) refund. The idea of the VAT is to use it to support social services in Iceland, if you are a tourist you won't be benefiting from those social services and can therefore get a refund. The VAT is usually about 25% of the price, so if you are shopping something expensive, the refund can be a handsome amount.
Water
Don't buy water in a bottle, it is a complete rip off. Tap water in Iceland is of excellent standard and Icelanders never buy bottle water themselves. In fact bottle water was not marketed in Iceland until tourist became frequent visitors.
Never Tip
Whether it be waitresses or bar tenders, there is absolutely no tradition for tipping and Icelanders never tip themselves at home, although they are big tippers themselves when travelling. Tips are always included in prices so don't toss your money away, nobody expects you to. That been said, if you are extremely happy with the service, then of course you can tip, it is not taken as an insult or anything like that, but as said before, it is not expected.
Hostels
Hostelling international has Youth hostels around the country. The one in Reykjavik is very modern, clean and cheap. It is situated in the area of Reykjavik's main recreation park, Laugardalur. In this park you will find an in-door ice-skating arena, the family park and farm animal zoo, botanical gardens, the largest swimming pool in Iceland(Laugardalslaug), one of Europe's greatest gym etc. The hostel is in walking distance from the city center, that is to say 1,5 km (1 mile).
Camping
There is a camping site in the same park as the hostel and you should not worry about the summer temperature (see temperature for Reykjavik), because it is generally milder than people expect given the name of the island. You need not worry about showering since it is situated right beside, Laugardalslaug, and like most swimming pools in Iceland it rates top in world standard and admission is cheap. It provides outdoor aquatic parks of swimming lanes, recreation pools, children pools, hot tubs, saunas, waterslide and outdoor work-out facilities, a fresh start before heading down town or a way to relax after busy days down town. We recommend campers to buy swimming pool ticket that allows admission 10 times for 2200 ISK. If you need sleeping bag, tent, linien etc, than you can cheap them cheap at Rumfatalagerinn. For more about camping, especially in the countryside, take a look at this outstanding website, it covers basically everything on camping.
Getting around
As for getting around in the city. One of the benefits for low budget tourists travelling in Reykjavik is that the city center, which hosts vast majority of the main tourist attractions, is a relatively small area. Travellers accommodations are usually located within this area, so money that would be spent in big European capitals on public transportation or taxis can be saved. However, if you will be needing to travel by bus on a day to day basis, then it would do you best to buy a Yellow, Green or Red card, it is a bus pass for 15, 30 or 90 days, respectively. The price for yellow card (15 days) is 3500 ISK. Otherwise, single far for the bus is 220 ISK.
Tourist Card
If you on the other hand if you fancy one or two days to use buses to take a look at museums around the city, or just see everything there is to see, we would recommend a tourist card called Reykjavik Welcome Card. It gives you unlimited access to public buses, swimming pools, museums, free internet access(probably at public libraries) and offers some discounts at shops and restaurants. 24 hrs card costs 1400.
Food
If buying some kind of fast food, be sure to always ask if there is a special offer. For example, almost every pizza place has a special offer if you pick the pizza up by yourself, often 2 for 1 etc. In the city center, there is some cheap fast food, most notably SS pylsur, hot dogs with onions and dressing, very popular amongst Icelanders. Piece of hot dog and soda should go for 300 kronur. The Grocery store, Bonus, has been the cheapest one in Iceland since it started some 15 years ago. Also relatively cheap are Kronan and Netto. Even though the krona devalued greatly, groceries are not cheaper than in Europe.
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