Credit Cards as a payment instrument is steadily rising in popularity, as more people are becoming aware of the numerous benefits they offer. Not only can they be a great way to ease the stress on your daily finances, when managed smartly, but also helps build your credit score that would enable you to get better deals on loans in the future.
However, when travelling abroad credit cards should not be your first choice to make payments as they come with heavy mark-up fees and conversion charges. In such situations, forex cards are your best companion as it enables you to carry foreign currency and pay for the expenses without any additional charges.
Here is why forex cards are ideal for travelling abroad:
Conversion charge
When you swipe the credit card in any merchant outlet abroad, you require to make a payment in the currency of the country for which the conversion charge is applied. For the international transactions, you may be charged up to 3.5 % of the transaction value. However, forex cards do not incur any conversion charge when swiped abroad.
Foreign exchange rates
If you make a transaction abroad via credit card, you may run the risk of getting charged more if the foreign exchange rates on the date of settlement of the transaction is higher. Foreign currency transactions are billed in Indian Rupees, using the foreign exchange rates published by the card networks, as of the settlement date and not the transaction date. The final bill includes the INR equivalent transaction amount, mark up charges levied by the bank and applicable GST.
With forex cards, you are well protected against fluctuations with the foreign exchange rates, as the rates are locked in once the card is loaded.
Cash withdrawal fee
Whether in India or while travelling abroad, using your credit card to withdraw cash should be avoided because of the huge charges it involves. Cash withdrawal fee through your credit card can cost anywhere between 2% and 3.5% of the withdrawal amount.
Additionally, when abroad, foreign currency markup fee and finance charges are charged along with cash advance fees. Foreign currency markup charge can go as high as 3.5% of the amount withdrawn while finance charge may range between 18% and 47.88% pa. Moreover, the finance charge is calculated from the date you withdraw cash until the date you make full payment.
Though with a pre-defined cash withdrawal limit, the cash withdrawal fees for forex cards are usually much cheaper. This fee also differs according to currency. For instance, the withdrawal fee can go up to $4 per transaction for the USD and up to €1.75 per transaction for Euro.
Flexibility and functionality
Also, forex cards provide great flexibility as they help to redeem the loaded money in multiple currencies, making them perfect for multi-country travel. Generally, multi-currency forex cards enable you to load up to 22 foreign currencies catering you with the benefit of zero cross-currency charges.
-By Sahil Arora – Business Head, Payment Products – Paisabazaar.com
