With awareness surrounding credit cards steadily on rise, more and more people are opting for them to avail the benefits they offer. Not only can they be an excellent way to lower the burden on your daily expenses, but if managed responsibly, they can also be used to build your credit score that would allow you to avail better loan deals.
However, when travelling abroad credit cards are not the right option as they come with heavy mark-up/conversion charges. In such a case, forex cards are undoubtedly the most convenient option as they enable you to make transactions without incurring additional charge. Here are the factors that make forex cards a better choice over credit cards for travelling abroad.
Conversion/Mark up charge
When you swipe your credit card abroad, card issuers levy cross currency mark-up fee which usually range between 2% and 3.5% of the transaction value. However, in case of a forex card if a transaction is executed in the same currency as the currency of the country, no cross-currency mark-up fee is charged. But if the transaction currency is different from the currency loaded on the forex card, banks charge a cross currency mark-up fee of up to 3.5% of the transaction value.
To save the mark-up charge on forex cards, make sure to load your card with the same currency as accepted in the country or opt for zero cross currency conversion forex cards. Zero cross currency conversion forex cards allow you to use the card in any currency at zero conversion charge.
Foreign exchange rate
Foreign currency transactions are billed in INR with the help of foreign exchange rates issued by card networks, as on the date of settlement and not on the date of transaction. Hence, transacting through a credit card while traveling abroad can cost you more if the foreign exchange rate on the settlement date of transaction is higher.
Forex rates, on the other hand, are locked once the card is loaded, protecting you against foreign exchange rate fluctuations.
Cash withdrawal fee
Every time you withdraw cash using your credit card from an ATM, card issuers levy cash advance/ cash withdrawal fee, along with finance charges. While cash advance fee range anywhere between 2% and 3.5% of the amount withdrawn or Rs 250, whichever is higher, finance charges can go anywhere up to 47.88% p.a. Additionally, when abroad, cross currency mark-up fee of up to 3.5% of the transaction value is also charged. Also, remember that finance charges incurred on credit cards are calculated from the withdrawal date until the date you make the final payment.
Unlike credit cards, forex cards incur lower cash withdrawal fees but have a pre-defined cash withdrawal limit. The cash withdrawal fee for forex cards differ according to the currency. For instance, the withdrawal fee can go up to €1.75 per transaction for Euro, up to £1.5 per transaction for British pound etc.
Compared to credit cards, forex cards provide great flexibility and convenience. Multi-currency forex cards offered by issuers allow you to load up to 22 foreign currencies offering you the benefit of zero cross currency charges, which makes them ideal for multi-city travel. Moreover, selective forex card issuers offer exclusive privileges such as 24×7 personal concierge service, free international SIM card, special discounts on wide range of travel services and emergency cash assistance in case if you lose your forex card.
As far as convenience and functionality are concerned, forex cards score over credit cards. Factors such as zero cross currency fees, fixed exchange rate at the time of purchase, low cash withdrawal fee and high flexibility make forex cards your companion on your travels abroad. However, you may carry credit cards as a back-up while traveling abroad.