Travelling Abroad? Why Credit Cards Often Beat Cash & Forex Cards
When travelling internationally, the best way to manage your finances isn’t always what you think. While cash and forex cards have their place, credit cards are increasingly proving to be a smarter, more rewarding option for many travellers.
Credit Card Advantages: Low Markups & Rewards
Several credit cards now offer significantly lower foreign exchange (forex) markups than conventional options. The HDFC Bank Infinia card,for example,charges just 2% plus GST on international transactions. Axis Bank’s Olympus card goes even further, with a markup of only 1.8% plus GST.
HDFC Bank cardholders can also benefit from the Global Value program, costing Rs. 500 annually (fully offset by equivalent bonus points). This program provides 1% cashback on forex transactions, up to Rs. 1,000 per month.
For those seeking to avoid forex charges entirely, cards like the RBL Bank World Safari, Scapia, IDFC Bank Mayura, and Ixigo AU Bank cobranded cards offer zero foreign exchange fees. Even cards with higher markups, such as the American Express Platinum Metal card (3.5%), can be beneficial due to their generous rewards programs – offering triple points on all international spending.
Avoid Dynamic Currency Conversion (DCC)
When presented with the option to pay in your home currency (INR) or the local currency at international terminals – a practice called Dynamic Currency Conversion (DCC) – always choose to pay in the local currency. DCC rates can be up to 8% higher than the standard exchange rate, effectively costing you 4% more than a 3.5% forex markup plus GST.
Moreover, many Indian banks now add an additional 1% markup plus GST when you use DCC. You also forfeit the enhanced rewards offered by cards like American Express Platinum and Axis Olympus for foreign transactions when opting for DCC.
Cash Considerations & Alternatives
Despite the benefits of credit cards, cash remains essential in some destinations.However, carrying large sums of cash presents risks and doesn’t earn interest.
For situations where cash is necessary, consider bank accounts offering fee-free international ATM withdrawals.indusind Bank, for instance, provides accounts allowing cash withdrawals abroad without extra charges. This can be a lifesaver in cash-dependent countries and eliminates the need to bring back leftover currency. If you do find yourself with excess cash, utilizing it to settle your hotel bill before departing is a practical solution.
Avoid airport forex counters, as their exchange rates are typically exorbitant.For traditional forex conversion, BookMyForex.com and other primary conversion agents offer more competitive rates.
Forex Cards: A Niche Use Case
Forex cards can be useful in specific scenarios, such as when provided by an employer for business travel or for extended trips where a secure method of carrying funds is desired.
When using forex cards, its advisable to choose cards with your name engraved on them (as many are issued without personalization) and, if possible, obtain the card from a bank where you already hold an account for easier currency reconversion upon your return.
(The author is founder and editor livefromalounge.com)