Forex card pull

Vijay C Roy

A few years ago, travelling abroad mandated a trip to the currency exchange dealer. Though cash is still a viable option, overseas travellers now have far more choices such as using a debit card, credit card or a forex card. Travel agents say they are seeing an upward shift in the preference for forex cards. A forex card is basically a prepaid card that can be loaded with one or more foreign currencies to make payments abroad. One can purchase a forex card from a bank or from any authorised money exchange dealer.

As per requirement, one can buy a multi-currency or a single currency forex card. Once abroad, you can use the forex card to swipe at any merchant outlet that accepts Visa or Mastercard payments or withdraw cash from ATMs of foreign banks.

International debit/credit card

• Have widespread acceptance around the world. Cards are accepted by millions of merchant outlets, ATMs, and online platforms in various countries.
• Convenient to use. Simply swipe and complete your transactions seamlessly
• Equipped with advanced security features.
• Come with attractive rewards and benefits like cashback offers, loyalty points, complimentary airport lounge access, and travel insurance coverage.
• Do not come under the purview of the LRS (Liberalised Remittance Scheme), so you won’t have to pay any tax collected at source (TCS) for international transactions.

Reasons to buy Forex Card

• Purchase a forex card online and load it in a foreign country.
• The card allows you to load multiple currencies at once, saving you time and effort in the long run.
• The amount loaded on the forex card is based on exact interbank rates. This means you exchange currency for free.
• Over 30 million stores globally accept forex cards, giving them an edge over other methods of carrying foreign exchange.
• As soon as you return, you can encash/unload the remaining balance online easily.

Cash is the default option and is preferred by individuals who use cash for domestic transactions. But cash comes with its own set of problems. If you are travelling to multiple countries, you must carry multiple currencies. In case you lose cash, you have no way to recover it. It is imperative to carry some cash for convenience, but not all.

Forex card is the most popular mode for travellers. Widely accepted, it is almost as good as cash. “A forex card stands as a widely accepted global payment solution, ensuring seamless transactions internationally. Equipped with advanced security features like a chip and PIN technology, these cards safeguard funds in case of loss or theft. Opting for a forex card is a convenient and secure approach to accessing foreign currencies abroad. It is recommended over regular credit cards that incur additional forex markup fees,” says Rikant Pitti, co-founder, EaseMyTrip.

The consistent growth in forex card usage, he says, underscores its popularity. “Looking ahead, the future appears promising, with the global forex cards market anticipated to reach $1,196.52 billion by 2031.”

Conversion rate locked

When you buy a forex card, the foreign exchange conversion rate is locked instantly as soon as you load money into it. The issuance fee varies anywhere between Rs 250 and Rs 1,000 and the exchange rate is determined upfront at the time of load. Some companies and online platforms like BookMyForex don’t charge for issuing the card. In the case of a credit card, the applicable foreign exchange rate is paid at the time of a transaction. So, forex card provides a sense of financial security against rate fluctuation. On the other hand, a credit or a debit card does not offer protection against volatility as the currency rates are unclear.

The rupee exchange rate keeps fluctuating against foreign currencies. The rates are applied when a transaction is made at a merchant location, i.e. when you swipe your card. As a result, whatever the prevailing rates are at that point will apply.

“We are witnessing a shift in consumer behaviour from cash to card for payments during international trips, especially by those using digital transaction in India. Around 80-90 per cent of corporate travellers are using forex card over others. In case of individual travellers, the adoption level is less but it is increasing,” says Sudarshan Motwani, CEO, BookMyForex.com.

Cheaper transactions

Credit, debit and forex cards offer similar withdrawal limits. However, with a forex card, you are charged a minimal flat withdrawal fee. Using a credit card in an ATM in a foreign location will cost you a cash advance fee of up to 3.5 per cent of the amount withdrawn, along with interest charges of up to 3.5 per cent per month on revolving credit, and a foreign currency transaction fee of up to 3.5 per cent of the transaction value, depending on the card.

Forex cards are becoming popular thanks to a zero-markup fee. For digital transactions abroad, you are charged a price over and above the actual transaction value, known as markup fee. Swiping a credit card outside India costs a cross-currency markup fee of 2-4 per cent of the transactions plus GST. Forex cards do not incur this charge.

However, a forex card has to be used within the currency jurisdiction for which it has been loaded. If a forex card is swiped outside the currency jurisdiction, a cross-currency fee of up to 3.5 per cent of the transaction value is charged. Charges may vary from one forex card to another. If you want to avoid this cross-currency fee, opt for multiple-currency forex cards. A couple of banks now offer zero-forex markup fees on credit cards as well, but the annual fees for such cards is higher.

Transactions made through a forex card are cheaper compared to credit and debit cards. The saving varies from country to country. “On an average, a forex card saves anywhere between 2-3.5 per cent compared to a debit or credit card. Compared with cash, it can save anywhere between 1-4 per cent,” says Motwani.

Forex cards attract tax collected at source (TCS) at 20 per cent from October 1, if the user loads over Rs 7 lakh on the card in a financial year. Earlier, it was 5 per cent. There is no TCS on international credit cards.