Forex Cards Vs Credit Cards: Which One To Choose For Hassle Free Travel?
With the growing notoriety of credit cards, more and more people are opting for them to take advantage of the benefits they offer. Not only can they be a great way to reduce the burden of your daily expenses, but if managed responsibly, they can also be used to build your credit score so you can benefit from better loan deals.
However, when traveling abroad, credit cards are not the right option as they come with heavy markup / conversion fees. In such a case, forex cards are undoubtedly the most convenient option as they allow you to make transactions at no additional cost. Here are the factors that make forex cards a better choice over credit cards for traveling abroad.
Conversion / marking fees
When you swipe your credit card abroad, card issuers charge currency markup fees that typically range from 2% to 3.5% of the transaction value. However, in the case of a forex card if a transaction is executed in the same currency as the country’s currency, no currency markup fee is charged. But if the currency of the transaction is different from the currency loaded on the forex card, banks will charge a currency markup fee of up to 3.5% of the value of the transaction.
To save the markup fees on forex cards, be sure to load your card with the same currency that is accepted in the country or go for zero conversion forex cards. Zero currency conversion forex cards allow you to use the card in any currency with no conversion fees.
Transactions in foreign currencies are invoiced in INR using the exchange rates issued by the card networks, on the date of settlement and not on the date of the transaction. Therefore, making credit card transactions while traveling abroad may cost you more if the exchange rate on the transaction settlement date is higher.
Exchange rates, on the other hand, are locked after the card is loaded, protecting you against fluctuations in exchange rates.
Cash withdrawal fees
Whenever you withdraw money using your credit card at an ATM, card issuers charge a cash advance / withdrawal fee, as well as finance charges. While the cash advance fee varies between 2% and 3.5% of the amount withdrawn or Rs 250, whichever is greater, finance charges can be as high as 47.88% per year. abroad, a currency surcharge of up to 3.5% of the transaction value is also charged. Also, keep in mind that finance charges incurred on credit cards are calculated from the date of withdrawal until the date you make the final payment.
Unlike credit cards, forex cards have lower cash withdrawal fees but have a preset cash withdrawal limit. The fees for withdrawing cash for forex cards differ by currency. For example, withdrawal fees can be up to € 1.75 per transaction for Euro, up to £ 1.5 per transaction for British Pound, etc.
Compared to credit cards, forex cards offer great flexibility and convenience. The multi-currency forex cards offered by the issuers allow you to load up to 22 foreign currencies, giving you the benefit of zero cross exchange fees, making them ideal for multi-city travel. In addition, selective forex card issuers offer exclusive privileges such as 24/7 personal concierge service, free international SIM card, special discounts on a wide range of travel services and support in emergency cash in case of loss of your forex card.
At the end of the line
When it comes to convenience and functionality, forex cards score compared to credit cards. Factors like zero exchange fees, fixed exchange rate at the time of purchase, low cash withdrawal fees, and great flexibility make forex cards your companion when traveling abroad. However, you can have a spare credit card when you travel abroad.
(The author is Business Head-Payment Products, Paisabazaar.com)