Traveling abroad and enjoying a well-deserved vacation in another country is a fantastic way to spend money. Using a credit card makes it easy to pay for things while traveling without worrying about counting cash or dealing with minor changes. But there’s a downside to using credit cards without comparing credit cards in India if you need to improve at keeping track of your finances.
Let’s imagine a situation – You saved up some money for a trip to Paris, and finally, you could go! You spend a lot of money on travel, fancy meals, and shopping. When unexpected expenses popped up, you used your international credit card to cover them. You noted the exchange rates for each transaction and calculated how much your credit card bill would be.
After some time, you return home to your everyday life, not thinking much about your credit card bill. But prepare for a shock because when the bill arrives, it will be much higher than you calculated. It might be around 5% to 6% more than you expected.
Types of Credit Card Charges Overseas
There are three types of charges that you need to be aware of when making overseas transactions:
Foreign Currency Conversion Fee: When you use your Indian credit card for a transaction in a different currency, such as Euros, a conversion fee is charged. This fee is typically between 1% to 2% of the converted amount. The remaining amount exceeding the conversion fee is considered a small profit for the bank.
Foreign Transaction Charge: Almost all banks impose a foreign transaction charge. This charge applies to cash withdrawals and regular transactions, regardless of the currency or the transaction amount. It usually ranges from 2.5% to 3.5% of the total amount transacted.
Cash Advance Fee: Cash advances, even when done within India, can be expensive. If you use your Indian credit card to withdraw cash in a foreign country, it will cost you even more. Each time you withdraw cash using your Indian credit card overseas, a 1% to 4% fee is charged. In addition to the overseas cash withdrawal fee, a standard cash withdrawal fee is also applicable.
It’s important to remember these charges while using your credit card or compare credit cards before even using them for overseas transactions to avoid any surprises when you receive your credit card statement.
Understanding Currency Conversion Rates for Transactions
The exchange rate applied to your credit card transaction is determined on the settlement day when MasterCard and Visa calculate the amount to be exchanged between the issuer and the acquirer. It’s important to note that the settlement date is before the transaction date.
This means that the exchange rate you had in mind when planning your expenses may differ from the actual rate at the time of the transaction. Additionally, merchants often report transactions to MasterCard or Visa a day or two after the transaction occurs. MasterCard and Visa calculate the exchange rate one day in advance, which remains the same for all transactions.
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More Information About Charges
To avoid surprises with credit card cash withdrawal charges, it’s highly recommended that you familiarize yourself with the charges associated with your credit card transactions. You can find Foreign Currency Conversion rates information on the MasterCard and Visa websites. These rates are subject to change, so checking them before you travel is a good idea.
You can contact your bank’s customer care service for details about Cash Advance Fees and Foreign Transaction Charges. These charges may vary periodically as they are dynamic. It’s a good practice to inquire about these charges before you pack your bags to ensure you clearly understand what to expect.
Choosing the best Credit Card
To select the best credit card for overseas use, especially if you travel frequently, follow these steps:
Research Charges: Before applying for a credit card, inquire about all the fees related to foreign transactions and charges related to withdrawing cash from credit cards . Different banks may have varying charges, typically 1% to 2%. Choose the card with the lowest fees to save money.
Currency Conversion Fees: Remember that Visa or MasterCard determines currency conversion fees, so you can’t change them. However, you can compare different credit card offers to find the best overall deal.
Carefully Read Offer Documents: Take the time to read the credit card offer document thoroughly. It contains essential information about charges and terms. Take it seriously, as it may hold surprises.
Understand Dynamic Rates: Rates can change over time, so you might not find exact figures in the offer document. However, it will provide you with all the regulations governing these charges, helping you make an informed decision.
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Conclusion
By following these steps and being aware of the charges, you can choose the most suitable credit card for your overseas travels, ensuring you save on unnecessary fees and have a hassle-free experience.
