While most credit cards issued in India are accepted across the globe, it does not mean that you should use them in any country without knowing the charges associated with it. Whether online or offline, always keep in mind that using credit cards abroad attracts currency and network-based charges, such as mark-up fees or foreign currency transaction fee, cash advance fees, which is charged as per the transaction’s value including the mark-up charges applicable, (Markup charge is basically the difference between the input cost and the final output cost which creates profit for the company. It is decided on the basis of a certain ratio which is calculated from the cost of a good or service and its selling price) etc., This process inculcates huge amount transactional charges overall. Therefore, it becomes necessary to keep a tab on your foreign currency mark-up fee, foreign transaction fee, and cash withdrawal charges when you use your credit card abroad.
Navin Chandani, CBDO, Bankbazaar.com said that while you do not have to pay any charges to use your card in the country it is issued, if used abroad, you would need to pay in the currency of that country. In this case, a conversion fee will be applicable. The network will automatically charge anywhere between 1-2% fee on foreign currency exchange and anything in excess will be a small margin of profit for the select bank if any.
“In addition, lenders also charge a foreign transaction charge. This can range from anywhere between 1.5 -3.5% of the total transaction. While this may not seem a lot for smaller transactions, for big ones these can run into thousands of rupees,” he said.
Cash withdrawals can also cost you anywhere between 1-4% fee in addition to the standard cash withdrawal rate for your Credit Card. So, it makes sense to carry cash or a travel card whose charges are muted compared to your card.
What you should do
While travelling abroad, credit cards save us from the hassle of carrying excessive cash and provide ease of transacting. If you are a frequent traveller, opt for a card that has a minimal transaction fee. Certain cards may even offer you ‘No Foreign Transaction Fee’ option. Select a card that rewards you heavily for foreign transactions so that the transaction fee can nullify when redeeming those rewards.
Sahil Arora - Head of Payment Products, Paisabazaar.com said that prepaid forex cards do not involve any transaction fee. They are pre-loaded with a certain amount and allow access to cash in the required foreign currency. The cardholder can even top up/reload this card anytime, as per his/her requirement. These cards also help in saving the mark-up fee levied by credit cards.
“I would recommend you to opt for prepaid forex card while travelling abroad. But do keep your credit card handy as well. It can act as an additional source of funds in case you run out of money,” he said.