Forex cards are a cheaper, value-loaded option for international travel

With the winter season coming, a lot of people would be planning an overseas holiday. And a holiday entails expenses. Carrying hard currency is an ideal option, but it may not be a wise decision to carry too much. According to current rules, foreign exchange (forex) up to $10,000 in any calendar year can be obtained from authorised dealers for visits abroad for tourism. This may be used for more than one visit. However, on a single trip, one is permitted to carry foreign currency notes/coins up to $3,000 individually. Anything above that has to be through instruments such as traveller’s cheque or forex cards. Let’s look at some other options:

International credit/debit card: A credit/debit card is a rupee card and is loaded with the Indian currency. When you use your card abroad, the conversion happens from INR to the currency of that particular country, and therefore Visa/ MasterCard automatically charges a 1-2 per cent fee on foreign currency conversion. “Since the rupee card is designed to work only in the currency of the country it has been issued in or domestically, the bank levies foreign transaction fee, which is around 3-3.5 per cent of the total transaction amount,” says Sudarshan Motwani, founder and chief executive officer (CEO), BookMyForex.

There are other charges levied by card issuers on transactions carried outside the country, which includes cash advance fee and finance charges. “Finance charges on credit card can be as high as 47-48 per cent a year. Card issuers also levy foreign currency mark-up fee (3.5 per cent of the transaction value) and foreign currency transaction fee (ranging between 1.99 per cent and 3.5 per cent of the transaction value),” says Naveen Kukreja, CEO & co-founder, Paisabazaar.

Traveller’s cheques: It is a cheque for a fixed amount that may be used for making payments abroad after the endorsement of the signature of the account holder. However, the advancement of technology and the emergence of convenient alternatives have resulted in them losing favour. Traveller’s cheques are not widely accepted anymore, and users may find it difficult to encash them. Moreover, traveller’s cheques are subject to forex rate volatility, and they also accrue charges on encashment.

Forex cards: Prepaid forex cards are tailor-made for financing international expenses. These cards are loaded with foreign currency/currencies of your choice and can be reloaded as and when required. Getting a forex card is cheaper, compared to currency, credit, and debit cards since there are no currency conversion fees and no foreign transaction fees. If the card is out of money, it can be easily reloaded while you are abroad.

Forex card scores over other instruments because it has several benefits. It can easily be blocked, much like debit and credit cards. Also, they come with a secondary card option which can be activated in case the primary one is lost or stolen. “Most issuing banks also provide emergency cash support in case of loss of forex travel card. Forex cards are also insured, and customers are protected against fraudulent transactions,” Motwani points out. It also has lower cash withdrawal fee at around $2 per withdrawal. In comparison, a debit card will be charged 1-4 per cent.

Then, there are multiple currency options, and hence, do not involve cross-currency mark-up fee as long as the card is used within the same currency jurisdiction. “If a forex card is swiped outside the currency jurisdiction, cross-currency fee of up to 3.5 per cent of the transaction value is charged. In case you plan for multi-country travel, opt for multi-currency forex cards as it allows users to load money in multiple foreign currencies on the same card,” said Kukreja. And there are also additional add-ons like insurance cover that provide for emergency cash assistance.

Forex cards score on

 
Safety: They can be easily blocked, like a debit or credit card

Cash withdrawal fee: You can incur a 1-4 per cent additional fee every time you carry out an overseas cash withdrawal through debit/credit cards. In forex cards, it is fixed at $2 per withdrawal

Currency options: Forex cards come with multi-currency denominations, and hence do not involve cross-currency mark-up fee as long as the card is used within the same currency jurisdiction

Insurance: Besides insurance cover, you get emergency cash assistance in case of the loss/theft of the card. Add-on card facility is also available, which makes a forex card safe, as the lost card can be blocked and the balance transferred to the new card

Acceptance: Accepted at all merchant’s establishments where Visa/ Mastercard is accepted