For international spendS, Indian residents using any HSBC credit card will not have to pay forex markup for a month beginning August 15. The offer is valid for both merchant point-of-sale as well as online foreign currency transactions.
While HSBC has rolled out this offer across all its credit cards, other card issuers such as Axis Bank, RBL or IDFC First are restricting this to their premium card variants (see graphic).
Zero forex markup
Forex markup adds directly to the cost of overseas spending. A zero forex markup credit card is useful for those who regularly spend in foreign currency. Frequent travellers may find such cards worthwhile even with a higher annual fee. Occasional travellers may get better value from a low annual fee card with a modest foreign currency charge.
The markups typically range between 0.5% and 3.5%. For example, a 3.5% markup would add Rs 3,500 to every Rs 1 lakh spent abroad without GST. While travel-focused credit cards come with lower forex markup rates, many premium cards also provide this benefit, though these often come with more stringent eligibility criteria.
A zero markup does not mean zero cost. Adhil Shetty, chief executive officer, BankBazaar.com says cardholders should compare the exchange rate, annual fee, rewards and international ATM charges. “The focus should be on the total cost of using the card rather than one headline benefit, ” he says.
Forex savings should not be the sole consideration for international travellers when choosing a card. They must evaluate the card’s broader travel value. Santosh Agarwal, chief executive officer, Paisabazaar, says you should factor in the card’s reward structure such as air miles and points and how easily these can be redeemed as well as additional perks, like complimentary hotel memberships, travel discounts, and airport lounge access. Comparing these features can help travellers identify a card that best aligns with their specific travel goals, she says.
DCC charges
When paying abroad, travellers should be careful about the currency option offered at the point of sale. The dynamic currency conversion (DCC) charges allow international card transactions to be billed in the traveller’s home currency instead of the local currency at the point of sale.
While DCC does seem convenient because cardholders know the exact amount they are paying in rupees, there is a catch. Currency conversion is typically done using the merchant’s or payment processor’s exchange rate, which is often less favourable. As a result, consumers end up paying more than they would have if they had chosen to pay in local currency.
Frequent international travellers should always choose to pay in the local currency. “In most cases, choose the local currency and let the card issuer handle the conversion. This keeps the currency conversion with your card network and issuer rather than the merchant,” says Shetty.
So, before travelling abroad, check your card’s terms for foreign currency and DCC charges so you know the costs involved.
Meanwhile, several leading card issuers are increasing their DCC charges. For instance, Axis Bank will increase the DCC fee on its credit cards (Select, Privilege and Neo) to 3.5% from 1.5%, effective August 28. The markup on Magnus for Burgundy will increase from 1.5% to 2%. HDFC Bank has also increased the DCC markup on Regalia Gold from 1% to 1.75%. For consumers who choose to pay in rupee, these revisions translate into a higher overall cost of international transactions.
However, HSBC is keeping its DCC charges at zero for all credit cards.
Disclaimer: This article is for informational purposes only and should not be construed as investment, financial, tax, or legal advice. Any illustrations, examples, or return projections used in this article are for explanatory purposes only and do not guarantee actual investment outcomes. The views and opinions expressed by experts quoted in this article are their own and should not be considered investment recommendations. Readers should consult a qualified professional before making any financial decisions.
Every financial journey has a turning point. What’s yours?
Financial Express is launching a new series highlighting real experiences with money, investments, and the taxman. Did a sudden tax rule catch you off guard? Did a piece of financial advice change your life? Your story could provide invaluable, practical lessons for thousands of fellow taxpayers. Share your experience with us. We respect your privacy: no stories will be featured without a direct conversation and your full consent. Thank you.