Travelling Outside India?
Learn about the charges associated with debit/credit/forex cards while travelling abroad and how to avoid them
Travelling abroad for business, leisure, or studies is exciting and an important aspect of your travel planning is bound to be handling money on the go. What’s your go-to option? Do you like to transact all in cash, debit/credit cards, or forex cards? No matter which option you pick, they all are bound to come with charges in one form or the other. Your aim should be making an informed decision so you pay the least amount of overhead.
Charges associated with debit/credit cards
Here are a few of the charges that most cards levy on your transactions:
1. Currency conversion fee:
A currency conversion fee of 1% of the purchase price is imposed by a credit and debit card network provider (such as VISA, Mastercard, or American Express) on the transaction amount to convert from one currency to another.
2. Foreign transaction fee:
A foreign transaction fee ranging from 2-3% is imposed by many (not all) credit and debit card issuing banks on a transaction that takes place overseas or with a foreign merchant.
For instance, you travel to New York and spend the equivalent of ₹1,000 in a store, and charge the purchase to your credit card or pay for it with your debit card. With a 3% foreign transaction fee, when you receive your account statement, you will notice a ₹30 surcharge. That’s the result of a foreign transaction fee imposed by your bank.
The foreign transaction fee is often also referred to as the foreign currency mark-up fee or foreign exchange fee (FX). The currency conversion fee and the foreign transaction fee are often combined and referred to as a single foreign transaction fee.
How to avoid foreign transaction fees: Consider debit/credit cards with no foreign transaction fees.
3. Dynamic currency conversion fee (DCC)
Dynamic Currency Conversion (DCC) is a value-added service that gives international travellers an option to pay in their home currency at the POS. This allows the merchant, acquiring bank or ATM operator to immediately convert a transaction amount into your home country currency for instant clarity. This service is available across 66 countries and applies only to VISA and Mastercard transactions.
In DCC, the currency conversion is done by the Acquirer Bank of the Merchant and they have the freedom to apply a conversion fee as high as 3-12% (or more) of your transaction amount.
If you wonder what’s the difference between currency conversion fee and DCC?
- DCC is also a kind of conversion fee, except it is imposed by the merchant (upon your approval) right at the POS
- The time when you find the actual transaction amount also differs – with the currency conversion fee, you’ll know the final amount only when it gets posted on your app or in the monthly statement, whereas with DCC, you’ll know it right away.
- The currency conversion fee is usually 1% of your transaction amount whereas DCC can be as high as 12%
- The currency conversion fee is mostly unavoidable (unless you opt for a “no fee” card) whereas you have the right to decline DCC to avoid being charged extra. It’s up to you to decide whether knowing the charge up front is worth paying the high DCC fee.
How to avoid DCC: Niyo advises all its customers to make the smart choice — transact in the local currency of the country they’re visiting and NOT in INR.
4. Cash advance fee
A cash advance fee is a charge by the bank for using a credit card to get cash. This fee could be a flat per-transaction fee of ₹250-500 or 3-5% of the cash advance amount.
How to avoid cash advance fee: The only way to avoid a cash advance fee is by not withdrawing cash on your credit card. If it’s unavoidable, try to minimize the amount of cash you withdraw on your credit card to pay a lesser fee.
5. Foreign ATM fee
International ATM usage usually comes with a flat fee of ₹100 or more and varies across various banks. It applies to both cash withdrawals as well as balance enquiries at ATMs abroad. It’s best to check with your bank upfront about such applicable charges.
How to avoid Foreign ATM fee:
- Use your banking app to find nearby branches and free ATMs
- Choose the cash-back option when paying at the stores
- Withdraw less frequently but in greater amounts
6. Over-limit fee
Your card issuing bank may charge you for exceeding your credit limit. This fee could be 2.5% of the amount you spent over your credit limit or a flat amount of ₹500 or above. Usually, your bank would deny your transaction when you try to spend over your limit, but for a fee, you can opt-in to have these transactions get approved.
How to avoid over-limit fee: Do not opt-in for the over-limit fee, there are hardly any benefits. Avoid spending up to your credit limit and if possible set alerts for when you are approaching your credit limit.
7. Annual fee
Many credit/debit cards charge a fee upwards of ₹100 every year for maintaining your account and to provide you with all the associated benefits of the card. Most of them charge the same fee every year, while others may even waive off the annual fee for the first year you hold the card.
How to avoid annual fee: Opt for a no-annual-fee card or talk to your bank about downgrading to a variant with a lower fee or a no-annual-fee alternative.
8. Other fees
Many credit/debit cards charge a card replacement fee in case your card is lost or stolen and it needs to be blocked and you need them to send you a fresh card.
All services offered by the banks are charged with a GST of 18%.
To avoid any surprises, it’s a good idea to familiarize yourself with all the different kinds of fees associated with your card before you travel.
Charges associated with forex cards
A forex card is a kind of prepaid card that is loaded with foreign currency of your choice depending on the country you are visiting. It works similar to a debit card and can be used to swipe at stores, make payments at international websites, or withdraw foreign currency from ATMs while travelling internationally.
Often, free spare cards are given with the purchase of a forex card. Also, the unused balance can be en-cashed or left on the card to be used during international trips in the future.
Here are the various charges associated with forex cards:
- Issuing fee and loading fee
Many forex cards provide the convenience of pre-loading multiple foreign currencies in India itself before your travel abroad. There could be a nominal issuing fee and loading fee that varies across different banks.
- Currency conversion fee
This fee applies only once when loading the card with foreign currency and shields you from fluctuations in foreign currency rates throughout your travel abroad.
- Unloading fee
For any unused foreign currency balance in your forex card that you want to convert back to INR, agents or banks usually charge a fee and you end up getting a lesser amount back.
The best way to carry money while travelling abroad
While travelling abroad, you might come across small expenses, such as paying for your in-flight purchases, cab fares, purchases at duty-free outlets, dining out, etc. You can plan on carrying a small sum of money in cash to cover such expenses. Carry your credit card only as a backup. For all your big-ticket expenses such as flight, hotel, or rental car bookings, etc. enjoy the benefits of the zero forex markup Niyo Global card.
Niyo Global offers the best in class digital banking experience for global travellers. Your “Tap and Pay” VISA Signature Debit Card integrated with an interest-earning* savings account doubles up as a multi-currency, zero forex markup** card that makes handling international purchases a breeze. You can load your account in INR and spend in any currency of 150+ countries around the world. The Niyo Global VISA Signature Debit Card comes with complimentary airport lounge access and exclusive concierge services (powered by VISA).
The unassisted 100% digital onboarding is intuitive and you can have your Niyo Global account in just a few minutes! Just keep your PAN and Aadhaar ready, download Niyo Global App and hop onboard right away.
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*For savings account balance up to ₹2 lakhs, an interest rate of 3.5% per annum shall apply. For incremental balance above ₹2 lakhs up to ₹5 lakhs, an interest rate of up to 4% per annum and for an incremental balance above ₹5 lakhs, an interest rate of up to 5% per annum would be applicable for the number of days the incremental balance is maintained. Interest is calculated on the daily end of the day balance and applicable interest as per slab is applied.
**VISA exchange rates applicable on all transactions