By Nitin Motwani
It is festive time and also time to travel and meet your near and dear ones. However, 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. Nowadays people use various types of financial instruments such as cash, debit cards, credit cards and travel cards, for their trips abroad, but forex cards are hailed as one of the best ways to carry foreign currency. This is because of their broader advantages such as high cost-effectiveness in terms of conversion rates, greater flexibility, enhanced security, and protection against currency fluctuations.
Enlisted below are a few pointers that you must be aware of before applying for a forex card for a more convenient and hassle-free trip abroad:
1. What are Forex Cards?
A forex card is a prepaid card you can use to make payment when traveling abroad or when you’re studying abroad. Prepaid Card, Travel Card, Travel Money Card, Prepaid Travel Money Card are just other names of a forex card. Since they are preloaded with foreign currency, you can access money in local currency abroad. 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.
2. How to Apply for a Forex Card?
You need the following documents to apply for a forex card:
# Valid Passport
# Valid Visa of the country of your travel (except where visa on arrival is applicable)
# Confirmed Ticket with Travel within 60 days.
# PAN Card
Once the documents are verified, you have to make the payment. You will receive the cards which will be active within the next 24 hours. Eligible age for a Forex card is 14+ years.
3. Are Forex Cards better than Debit and Credit Cards?
Debit and credit cards involve a surcharge of 3.5-6%. It means if you get a bill of Rs 5000 in a restaurant abroad, you pay Rs 175 more (3.5% surcharge). Debit and credit cards also attract a flat charge for ATM withdrawals.
There are basically three types of charges involved:
# Foreign Currency Conversion fee –
This is the fee that a Visa or Master card charges you because your card is Indian and your card balance reflects in Indian currency and when you use it abroad, you pay it in the currency of the country you are in. The conversion happens from INR to that currency and Visa and MasterCard automatically charge a 1-2% fee on foreign currency exchange and anything in excess of it is generally a small margin of profit for the bank.
# Foreign Transaction Charge–
This is the charge that your Debit/Credit card provider puts on you for carrying out a transaction in foreign currency. Your Debit/Credit card is designed to work only in the currency of the country it has been issued in or domestically, but when you go abroad and use the card to either shop or withdraw cash, your bank will charge you for that foreign transaction, which makes up for around 2.5 -3.5% of the total transaction amount.
# Cash Advance/Withdrawal Fee –
Withdrawing cash using your credit card comes with a charge called Cash Advance Fee, irrespective of whether you used the card in India or abroad. The fee, however, is higher when you use your card abroad. And when you withdraw money from ATMs abroad using your debit card, you will have to pay a withdrawal fee. This is the fee that your bank agrees to pay to the bank whose ATM you used to withdraw cash as they allowed the use of their ATMs. You can incur a 1-4% additional fee every time you carry out an overseas cash withdrawal.
4. What if I want to reload my Forex Card?
A recent research found that people spend more using Debit/Credit card when they run out of cash abroad. Reloading a forex card is very simple. You can do it in 3 simple steps:
# Just ask for a reload form, fill it and send the scanned form back via email.
# You will receive a payment link wherein you can make a payment.
# Your card will be loaded within the next 24 hours.
5. What if I want to encash the remaining balance?
Encashing the remaining value is as simple as reloading your forex card. Visit the issuing bank or money exchanger, fill in a form and funds will be transferred back to your account.
(The author is CTO and Co-founder, BookMyForex.com)