If you are thinking of travelling abroad, it is essential to devote some time to plan your finances for the trip. The first step in planning your expenses is to choose the best financial instruments for transactions during your holiday. While the first and most ubiquitous option that comes to mind is carrying physical currency in a foreign country, it is not necessarily the best one.
A couple of decades ago, traveller’s cheques were considered to be the best financial instruments for people visiting a different country. With the evolution of technology, however, these cheques have become obsolete. Nowadays people use various types of financial instruments such as cash, debit cards, credit cards and travel cards, for their trips abroad. Among all these, prepaid forex travel cards are the most recommended financial instruments.
Forex prepaid cards or forex travel cards are similar to debit or credit cards except that you carry Indian Rupees when you use credit or debit cards. Hence the rupees in credit/debit cards get converted into foreign currency at the time when you use those at a store/hotel/online shopping or an ATM, etc. You have no control over the exchange rates applied. Usually credit and debit cards attract foreign exchange margins of 3-5 per cent or Rs 2-3.5 for every USD (equivalent) that you spend.
In case of forex pre-paid cards however, you change Indian Rupees to foreign currency at the time when you buy them and hence you control the rate of foreign currency that is fixed.
These cards can also be topped up with foreign currency that can be used for purchase of goods and commodities on your holiday.
Being specifically designed for travellers, these are cheaper and safer than buying paper currency.
Listed below are some other factors that make prepaid forex cards a better choice than physical currency.
With cash, there is always a risk factor involved. Reports of loss and theft of wallets is a common occurrence in foreign countries. In such a scenario, it is better to opt for a prepaid travel card as it can be blocked like debit and credit cards. (this has been withdrawn). Text alerts and online statement facilities help to keep a track of the transactions done during a trip. Forex travel cards are also equipped with a built-in insurance mechanism which helps travellers claim a secondary card in case the primary one is lost or stolen.
Forex travel cards are accepted by a vast majority of businesses, including hotels, restaurants, shopping malls and online marketplaces. In fact, the cards are also accepted by taxi services in several countries. This further proves that prepaid cards, with multi-currency forex facilities, are perfect if you are visiting multiple countries. The problem with cash is that if you’re going to cover several countries as a part of your itinerary, you will need to carry different currencies. So if you’re going for a South East Asian sojourn, you’ll need Thai Baht, Indonesian Rupiah and maybe the Malaysian Ringgit. Instead, just carrying a multi-currency card is so much more convenient and hassle-free!
Convenience and portability
Arguably the most important aspect of forex travel cards is that it is small and easy to carry as compared to cash. It is an ideal substitute to avoid confusion regarding the various denominations in foreign currency. Since these denominations are unfamiliar to a traveller, they can be hard to manage during transactions. These cards also help you to withdraw foreign currencies from ATMs abroad by paying a small fee. This not only saves money, but is also far more convenient than carrying a fat wallet around.
Apart from all the aforementioned advantages, buying prepaid cards is more economical than buying foreign currency. Mostly, travellers are not aware of the current market rate and end up paying much more than the bank exchange rates. In foreign exchange shops, brokers set the exchange prices at a surplus to cushion the variability of the exchange market and to get better profits. Prepaid forex cards, on the other hand, are frozen at a rate that negates fluctuation and market volatility. In other words, the value of the foreign exchange amount in the prepaid card remains fixed and is based on the exchange rate of the day. The best part is that even when forex rates are favourable, you’ll still manage to get a better exchange rate on a pre-paid card. With travel forex cards you can always ensure that you never run out of money and in case of an emergency, someone back home can top it up for you. Some prepaid cards have a certain minimum top-up criteria, the balance of which is refunded once you come back home. The currency can be converted at the best exchange rates on offer without having to pay anything extra. Considering the numerous advantages discussed, forex travel cards will undoubtedly add much more comfort, convenience, accessibility and security to give you that much needed peace on a long awaited foreign trip.
The author is co-founder and CEO, BookMyForex.com