When travelling abroad, travellers can choose either cash or cards for payments. For card options, debit, credit, and forex cards are available. While most travellers would have a debit card, using it for international transactions is typically more expensive.
A more economical option is a prepaid forex card, which allows you to carry foreign currency in the form of plastic in place of cash. A forex card is cheaper because the markup charged on currency conversion is lower compared to what banks apply to debit cards when they are swiped outside India. However, they come with their own fees and charges.
Know the various costs
A forex card allows users to buy and load single or multiple currencies. When you load the currency on the card, the bank converts it according to its prevailing exchange rate. The key difference compared to debit cards is that the markup charged on international payments done with debit cards is, in most cases, bigger than the spread that a bank or financial institution charges over the mid-market exchange rate while selling forex.
For example, the US dollar exchange rate offered by HDFC Bank on 8 November was Rs 85.99. If a user of an HDFC multi-currency forex card loaded the card with $500, they would pay about Rs 43,070 (including the Rs 75 loading fee charged by the bank). Now, for foreign currency transactions on debit cards, HDFC Bank charges a 3.5% markup. The exchange rate applicable on debit card transactions is the Visa or Mastercard wholesale exchange rate on that date.
Assuming the cardholder used a debit card on the Visa network, swiping the card for payments worth $500 would debit Rs 43,683 from his bank account, as per the Visa exchange rate calculator, approximately 1.5% more than using a forex card. To be sure, these calculations do not consider the 18% GST and service tax applicable to both forex card and debit card payments.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Small loans can spell big trouble for Indian banks
Watch out for signs of stress in India's micro-finance sector. Bad loans, even if small, extract a cost by way of reduced profits as well as higher interest charges on credit across the board
India should redesign its public safety signs to save lives
Mind studies suggest that the use of photographs depicting fear could trigger safe behaviour
Burberry is looking like a fine acquisition target this winter
This brand known for its chequered story can surely perform better
The Washington Consensus has collapsed and it won't be missed
The combination of free-market capitalism and electoral democracy that it promoted has failed to serve everyone equitably
India's statistics ministry has a new sense of purpose
The flurry of activity to get India's statistics right is laudable but we await regulatory design clarity
The rupee could suffer collateral damage if a currency war ensues
The US election is a game-changer for foreign-exchange markets that will test the rupee and RBI
PASSIVE INCOME STRATEGIES FOR MSMEs: SECURE GROWTH, STABILITY IN UNCERTAIN TIMES
I Forging diverse passive income streams takes time, but steady approach builds a strong base
Securing financial future of a child with special needs: A parent's guide
If you have a special needs child, especially with communication disability, how can you best secure his or her financial future?
A simple guide for NRIs to invest in Indian MFs online
Unlock a wide range of investment options from anywhere with just a few simple clicks
HOW FOUR INDIAN STATES ARE WOOING FOXCONN
The Taiwanese manufacturing powerhouse has already invested $10 billion. Now, it wants to expand