Travelling abroad? Carrying forex cards could work best for you

Cash works best in countries whose currencies are not majorly traded

When travelling abroad, deciding between carrying cash, prepaid card or foreign exchange (forex) card can be tricky. Forex cards work out to be the best bet if you are visiting popular tourist destinations or to a developed economy. You should take a forex card if your destination country is the US, the UK, European nations (where euros are used), Australia, Canada, and so on.

But if you are travelling to a country whose currency is not majorly traded, cash usually works out to be a better option. Instead of taking Indian rupees, take US dollars as they are universally accepted and can fetch better rates. Another option is to opt for a global card from digital banking solutions company NiYO. “Think of it as a debit card with no currency mark-up fees,” says Vinay Bagri, chief executive officer (CEO) and co-founder, NiYO.

Usually, when a traveller swipes his debit card abroad, his bank charges 2-5 per cent currency conversion fee. NiYO Global Card is different from a forex card as the underlying currency is in Indian rupee. “Forex cards are denominated in a foreign currency and the exchange rate is locked upfront. In our case, the traveller pays exchange rates applicable at the time he uses the card,” says Bagri. 

The product also comes with an app that allows activating and deactivating the card, check the prevailing exchange rates, and allows loading of the card through Immediate Payment Service or Unified Payments Interface.

Online start-ups in the forex business have made it cheaper and more convenient to avail of cash as well as cards. Online currency exchanges such as BookMyForex don’t charge issuance fee, allow travellers to upload documents online, and the card is delivered home. Same goes for NiYO. The rates on the forex card are interbank rates. This is the wholesale rate at which banks buy and sell forex. You can also load up to 13-15 different currencies on one card.

Even when it comes to availing of foreign currency in cash, online platforms such as BookMyForex and Buyforex are cheaper. Banks and dealers charge a higher commission for cash. Currency rates change every second. Banks and dealers keep a cushion for the fluctuation in price. The rates at dealers also depend on the demand and supply of the currency. The commission is higher if the currency is not among the major ones.

Cash is recommended in countries whose currencies are not widely traded because it will help to save on commission. Explains Sudarshan Motwani, CEO and co-founder, BookMyForex: “If a person is going to Thailand, for example, the commission on cash can range between 2 per cent and 8 per cent in India. If you buy US dollars in India, you will be charged a commission of only 0.5-1 per cent and, in Thailand, you will pay a similar commission. This way you can exchange the rupee to bahts by paying less than 2 per cent in commission. The commission on less popular currencies varies with the travel season. It’s lower from April to June (2-5 per cent) and higher from December to January (4-8 per cent).

When it comes to forex cards, use them only for payments. If you use it to withdraw cash, you may need to shell out automated teller machine charges on each transaction. The fee varies from country to country. Also, avoid traveller’s cheque completely as dealers abroad charge high commissions to exchange them.