Iceland, a country known for its dramatic landscapes, volcanoes, erupting geysers, lava fields, and soothing hot springs, is located in the North Atlantic Ocean close to Greenland and the UK and is home to the world’s northernmost capital, Reykjavík.
The country is now extremely popular with travelers from across the world. However, most tourists tend to base themselves in the capital and then venture out on day trips, often chasing the Northern Lights that can be seen across the country during the winter months.
For budget travelers, Iceland may not be a country you would normally consider, and it is easy for costs to spiral should you allow it. However, if planned right, it can still be an affordable place to explore, and with budget airlines now operating in and out of the country, they are providing the cheapest way to travel to Iceland.
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The best time to visit Iceland
One of the best things about Iceland is that it is an all-year-round destination. Traveling in the summer months will see you chasing the midnight sun, while in the winter months, with the shorter days, people will be hoping to catch a glimpse of the coveted Aurora Borealis, which is known to appear on clear nights, dancing unpredictably across the sky.
There is, therefore, no specific period that is the best time to visit; instead, it depends on what activities you would like to do while on the Nordic Island.
If you have always wanted to experience 24 hours of sunlight, visiting in June is a must. If you are planning to put on a pair of crampons and climb a glacier, the winter months will be more appealing.
Planning is vital because certain parts of the country will be inaccessible during the cooler months. Therefore if you were hoping to explore the interior of the country, you might need to plan to visit in early spring or into the summer months.
It is also essential to remember that with low-cost carriers now flying into Keflavík International Airport, there has been an influx of visitors on budget trips to Iceland over the past ten years. If you were hoping for a relaxing dip in the Blue Lagoon, consider traveling off-season when tourism numbers begin to dip.
Budget things to do in Iceland
Mount Esja and The Red Hills
For those that love long walks or hiking in nature, Iceland has some fantastic areas to explore for free.
Just outside Reykjavik, and easily accessible by bus and bike, standing at 2998 feet (914m) above sea level sits Mount Esja.
This mountain range, partly volcanic, offers excellent hiking opportunities for anyone wanting to explore or see the capital from above from the summit of either Thverfellshorn or Kerholakambur.
Another area close to the center is the Red Hills, The Raudholar. This area is full of scarlet red craters dating back 5,000 years that are part of the Heidmork Nature reserve and are popular with those seeking a tranquil day away from the city streets.
The Botanical Gardens
Founded in 1961, this beautifully designed garden in Reykjavik is home to more than 3,000 plant species, demonstrating the diverse vegetation that can survive in freezing temperatures in Iceland.
During the summer months, they also offer free tours of the grounds, where you can learn even more from the experts as you wander around the gardens and the ponds seeking out the wildlife and flora on display here.
Kolaportið Flea Market
Hidden away near the old harbor in Reykjavik, this little gem hidden away is full of antiques, toys, clothes, food, and much more.
Whether you are after a traditional, hand-knitted Icelandic jumper or some traditional treats to try, exploring this large warehouse could be a great way to start your weekend in the city.
Hlemmur Food Market
Reykjavik’s first food hall, located in what was the local bus terminal, is open from 8:00 – 23:00 daily and is full of vendors serving everything from breakfast to late dinner. Here you can try local Icelandic delicacies, some of which may not appeal to everyone.
For those less adventurous, you will also find Mexican, Vietnamese, Danish, and Italian dishes alongside freshly baked bread, wonderful-smelling fair-trade coffee stalls, and an ice cream stand popular for its use of liquid nitrogen.
If you want to sample a variety of dishes while taking in a vibrant atmosphere, it is worthwhile to seek out this place, and it may not be as budget-busting as other food outlets in the city.
This futuristic-looking domed building Perlan, on Reykjavik’s outskirts often referred to as ‘The Pearl,’ can be seen across the city. It is home to several different exhibitions, and as of May 2023, visitors will also be able to fly along the new zipline being installed.
On clear days not only do you have a great view of the city, but you can also see Snæfellsjökull, a giant glacier-capped volcano residing on the western coast of the island.
Visit the Grótta Lighthouse
Slightly further out of Reykjavik, this lighthouse is about an hour’s walk along the coast or a bus ride away.
Still, it is worth the journey if you want to spend an afternoon bird-watching in the summer while gazing out over the ocean to see what other wildlife may appear.
It is also highly recommended to visit during the winter and after dark to catch a glimpse of the northern lights.
Explore the street art in Reykjavik
Whether as part of an organized tour or on your own, Reykjavik has a growing urban art scene not to be missed.
Wander around Downtown Reykjavik, and you will see that several businesses have embraced graffiti inside and out with commissioned work by some well-known street artists. Head to Bar Ananas or Freddi Arcade and Toy Museum to see the work on display.
Take part in a Free Walking Tour
If you are interested in discovering more about the country’s history, hearing stories about Vikings, learning about the best places to eat and socialize in the city, save money and take a free walking tour around Reykjavik.
It is one of the best ways to start a trip to a new town and in just a couple of hours you will not only have seen the city’s significant sights but will learn a few interesting facts about the country as you go.
This iconic church is easily recognizable as one of the most captured buildings in Iceland. With its modern facade, it is one of the most unusual churches you will ever stumble across, designed to represent the volcanic nature of Iceland.
Head inside, and for a small fee, you can climb to the top of the church, which also happens to be the tallest building in the city, for amazing views across the multi-colored rooftops.
Places to visit in Iceland on a budget
Thingvellir (Þingvellir)National Park
This national park, just east of Reykjavik, is notable for several reasons. Firstly, it was the site of Iceland’s parliament (Alþing) between the 10th-18th centuries, and secondly, the park is separated by a rift valley created by two different tectonic plates.
Here, you can walk between two continents where the cracks have appeared between the North American and Eurasian plates or dive into the silfra ravine.
Visit the Great Geysir
Haukadalur Valley is home to the Great Geysir and many other smaller geothermal pools and geysers. While the Great Geysir rarely erupts now, Strokkur is an impressive sight, which bubbles and then explodes every few minutes hitting heights of around 30 meters.
Iceland is not short of waterfalls, with 100s falling across the country. However, if you only have time to visit one, the Gullfoss waterfall is perhaps the most impressive and can be heard long before it comes into your sights.
Along with Thingvellir and the Haukadalur Valley, this particular waterfall is often referred to as the Golden Circle. It will usually be incorporated as part of a tour of the area.
Being both an island and a country, Iceland is home to some fantastic seafood, although some of the best are served up in Hofn.
Outside of the capital, it is also the largest town on the south coast, on the eastern side, so if you are looking to explore via the famous ring road, this is the ideal place to stop off for a few days to explore glaciers, the mighty Vatnajökull, several different hot springs, waterfalls and mountain ranges.
Undeniably the most well-known in all of Iceland, the black sand beach here is framed at either end by dramatic basalt cliffs, looming across the skyline. The beach was created by a volcanic eruption over 100 years ago when lava streamed down and was cooled by the waters. Over time that lava has eroded and worn away, creating the small gravelly pebbles that are now seen today.
If you are traveling the Ring Road from Reykjavik, you may also want to stop and visit the abandoned aircraft at Solheimasandur. Dating back to 1973, this plane crashed after running out of fuel. Thankfully all on board survived, but the crash site is visited by many as they complete their Iceland trip.
Jjökulsárlón glacier lagoon
Wildlife lovers will appreciate this natural spectacle. The lagoon is the outlet for the Vatnajokull Glacier, the largest in Europe, and is home to a herd of seals and several different birds, including puffins and the great skua.
Film buffs are also likely to recognize the location as it was used in Tomb Raider, Batman Begins, and two James Bond films.
The Blue Lagoon
Perhaps the most iconic attraction in all of Iceland, no trip would be complete without an afternoon relaxing in the healing hot springs.
This geothermal spa, with waters as warm as 39 degrees, is located in a lava field near Grindavik and is only 20km from the airport.
For those traveling Iceland on a budget, bus routes are offering cheap tickets to the lagoon on the way either to or from the airport.
Where to stay in Iceland on a budget
The capital only takes around 2 hours to walk around, making it one of the smallest cities in Europe. Therefore, regardless of which area of the city you choose, you will find reasonably priced guest houses and hostels.
Guesthouse Pavi is only 50 meters from Laugavegur street, so central to exploring the capital, or you could opt to stay at the Bus Hostel, which is closer to Perlan and offers free parking should you wish to hire a car but is about 20 minutes from the central area of bars and restaurants.
For those after something unique, check into the Kex Hostel, once a former biscuit factory. It has everything you would expect of a hostel but also houses a gastropub, a barber, and an outdoor terrace.
Alternatively, to keep your Iceland trip costs down, you may rent an apartment for a few days, allowing you to cook for yourself rather than eat out each day. Northern Comfort Apartments are centrally located and offer rooms with small kitchenettes.
If you plan to visit the south coast, Vik is the perfect spot to stop halfway between Reykjavik and Hofn. The Barn is a hostel located close to Vik center close to the Mýrdalsjölill Glacier and offers sleek modern dorms or double rooms with private facilities, along with a communal kitchen and a bar.
Alternatively, the Puffin hotel provides a selection of rooms with private facilities in the heart of the village with easy access to the black sand beaches, the historic lighthouse, and a direct walking trail up Reynisfjall. This mountain towers over the town.
For those wanting to explore the Golden Circle at their own pace, Lake Laugarvatn is the perfect place to stay if you are looking to keep your Iceland trip cost down because the national park, the famous geysers, and the waterfalls are all within driving distance plus you have the lake.
Hekla Volcano and the Eyjafjallajökull Glacier all on your doorstep. Héradsskólinn Historic Guesthouse is a 1920’s former schoolhouse that offers various sleeping options and is right next to the Laugarvatn Geothermal Baths.
If you are traveling the main ring road and decide to make an entire loop of Iceland, Akureyri is a popular place to stop.
Known as the capital of the North, full of cafes, bars, and culture, this town is popular with those looking to explore the Myvatn region, where you can climb up Mount Sulur or visit the Laufas Turf Houses.
It is also rated the top place in Iceland to go whale watching. Akureyri Backpackers Hostel is one of the most popular places to stay in the area, as it is surrounded by coffee shops, shopping areas, and museums.
How to get around Iceland on a budget
There are several options, but perhaps the cheapest way to travel in Iceland is on their bus service.
If you are predominately looking to travel around the area closest to Reykjavik, purchase a bus passport that allows you to hop on and off the bus service.
Their flexible routes will enable you to travel in a budget-friendly way while seeing the sites, and traveling during the summer months also provides easy access to campsites.
For those wanting a bit more flexibility, many car hire companies are available that operate straight out of Keflavik airport.
It may not be the cheapest way to travel around Iceland on a budget in 2023 with the added element of fuel costs and insurance, but it will undoubtedly provide you with the freedom to visit places the bus routes don’t venture to.
Alternatively, for those looking to create their own adventure, traveling around the country, predominantly during the summer months, hiring a campervan may be the best way to travel. Not only will you have the flexibility of a car, but you will also be able to camp cheaply.
Camping is one of the least expensive ways to overnight in Iceland, and the stars seen on a clear night would be epic in some of the more remote parts; plus, during the midnight sun, you would have the ability to travel 24 hours a day. You can also purchase a camping card in advance to reduce the costs even further.
Cheap tours to do in Iceland
If, however, you prefer to explore with others, plenty of cheap tours are available.
Chasing the Northern Lights
One of the many reasons to visit Iceland in the winter months is to see the northern lights. Going on an arranged tour means they know the best places, increasing your chances of seeing them.
They will take you to remote viewpoints where there is no light pollution in the hope that you will see the green phenomenon race across the blackness while holding mugs of hot chocolate to keep you warm.
Exploring the Golden Circle
If time is precious, an organized trip is the best way to see all the natural wonders within the Golden Circle.
You will visit the UNESCO World Heritage site of Thingvellir, experience the sound of rushing waters at Gullfoss waterfall, and come up close to nature with a trip to see Strokkur erupt.
If you want to explore the contrasts in nature, a trip to Snæfellsnes Peninsula will incorporate mountain scenery with volcanic craters, black sandy beaches, and small fishing villages. In just one day, you could see all aspects of Icelandic life, making it a day of cheap travel in Iceland.
Whale and Puffin Watching
For wildlife lovers, there is nothing better than observing animals in their natural habitat. Whale watching and puffin excursions have become increasingly popular over the years as everyone hopes to catch a glimpse of these rarely-seen creatures.
Unlike many other activities you can undertake in Iceland, a trip of this kind is probably the best way to guarantee some sightings.
Recommended budget tours in Iceland
- Reykjavik Scavenger Hunt and Self-Guided Walking Tour
- Reykjavik Main Sights and Hidden Spots: A Self-Guided Audio Walk
- Geothermal Energy Exhibition Entry Ticket
- Skip the Line: The National Museum of Iceland Ticket
- Aurora Reykjavík, The Northern Lights Center Entrance Ticket
- Airport Express Shared Departure transfer from Reykjavik City to Keflavik Airport
- Airport Express Shared Arrival Transfer from Keflavik Airport to Reykjavik City
- Dinner Experience with a Local Family in Hofn
- Northern Lights at Aurora Basecamp Observatory. Guided experience.
- City Sightseeing Reykjavik Hop-On Hop-Off Bus Tour
- Walking tour of Reykjavik city
- Reykjavik City Card 24-hour
- Top 10 Budget Friendly Hotels in Iceland
- 15 Remarkable Things to see and Do in Iceland
- 48 Hours in Iceland – A 2 Day Itinerary
- 10 Day Itinerary for Iceland
- The Best Day Trips from Reykjavik
- 8 of the Best Volcano Tours in Iceland
- 7 of the Best Golden Circle Tours in Iceland
- 9 of the Best Iceland Glacier Tours
- 9 of the Best Iceland South Coast Tours
- Luxury Travel Guide to Iceland
- Guide to Visiting Iceland
- Is a Tour to Iceland’s South Coast worth it?