If you are planning a trip abroad, you may have saved up for it and wish to do all the things tourists usually do like splurge on fine dining experiences, shopping and local commutes.
On the holiday you may not give much consideration to how much you are being charged due to the currency valuation difference, as that can get confusing. Even if you manage to watch the currency exchange rates on a daily basis, you may return to India finding a higher than expected credit card bill eating up your monthly budget.
While most credit cards issued in India are accepted abroad, they all do attract hefty additional charges. You should be aware of the following credit charges irrespective of whether you are using it online or offline.
When you use it in the country of issue, you are not charged, but when you use it outside your country's jurisdiction, you will be charged with 3 basic kind of fees.
1. Foreign currency exchange fee:
Your Indian rupee balance will have to be converted into the country of your visit's currency, for which your payment network operators like VISA or MasterCard will charge you a 1 to 2 percent of the transaction amount. Your bank and the receiver's bank could also charge you a small percentage on this as profit margin beyond this fee.
Note that the exchange rate calculated for the fee is processed by VISA or MasterCard on settlement day and not on the day of calculation, which means that it will depend on the day your merchant posts it to the payment network. This is ideally a day or two after the transaction takes place.
The rates could vary based on your payment network, for example, exchange rates for VISA are calculated a day in advance. To understand the complete rules and fees charges, you can check the foreign currency conversion fees details on the VISA or MasterCard websites just before you set out to travel.
2. Foreign transaction charge:
A 1.5 to 3.5 percent of the transaction amount will be the transaction processing fee charged by the banks and this will be significant on a bigger amount of purchase.
3. Cash Withdrawal fees:
Even cash withdrawals made in India using credit cards are heavily charged and it definitely will be charged more abroad. Apart from the usual cash withdrawal fees, it will attract an additional 1 to 4 percent as foreign withdrawal charges.
What can you do to save on international travel expenses?
If you are a frequent traveller, apply for special international travel credit cards which come with minimal transaction fees. These also reward you for your foreign transactions, compensating for charges if any. Another alternative to regular credit cards are prepaid forex cards. These can be preloaded with a certain amount and allow access to cash in the currency of the country of visit. They do not have any transaction fees. One can even recharge or top-up the card with if they require later.