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Foreign Exchange: Know the benefits of a forex card

Most forex cards do not levy any transaction fee for purchases at merchant outlets but can have card issuance fee or loading fee

During the selection process, keep an eye on the fees and charges as that could turn out to be a damper if one does not use the card carefully.
During the selection process, keep an eye on the fees and charges as that could turn out to be a damper if one does not use the card carefully.

If you are looking to travel abroad, an important element of your travel plan should be to keep some foreign currency notes in your wallet. If carrying them is a concern, you can buy a forex card which is basically a prepaid card that can be loaded with one or more foreign currencies to make payments abroad. You can purchase a forex card from your banker or from any authorised money exchange dealer.

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

Keep in mind the fees, charges
There are plenty of options and varying features available while buying a forex card. Choose the one that meets your needs rather than going for a full feature-loaded one unless required. During the selection process, keep an eye on the fees and charges as that could turn out to be a damper if one does not use the card carefully.

Generally, forex cards do not charge any transaction fee when used at merchant outlets and this makes them a better alternative to debit or credit cards. The most important charge is the ‘currency conversion charge’ which should be as close to the interbank rates as possible.

But then there could be a plethora of other charges in a forex card, of which you need to pay special attention to three or four charges. First, there could be a ‘card issuance fee’ which is around Rs150 though some banks or dealers may waive it off. Next is the ‘loading and unloading charges’ which could also be in the range of Rs 150 or free in some cases. Then comes the ‘cash withdrawal’ charge at ATMs abroad that could be around 1% of the withdrawn amount and even a fixed transaction fee. An additional fee could be levied by the bank owning the overseas ATM.

Avoid withdrawing cash from ATMs
Overall, use forex cards only for swiping at point of sale and restrict usage for withdrawing cash from ATMs. And, look for options that have zero or minimal fee for currency conversion, transactions at a merchant outlet or while withdrawing cash from ATMs—these three are the major forex usages when one is abroad.

There are a few fringe charges as well such as for receiving SMSes everytime you transact using a forex card abroad or for getting a statement after a transaction at an ATM. Try to avoid them to keep the limit on the forex card from getting exhausted. Also, remember there is a ‘inactivity fee’ if the forex card is not used within 180 days of returning to your home country. Being aware of the forex card charges and usage terms , will hep you make the most out of the forex card when you are abroad.

Debit card, credit card
One may also use the international debit card or a credit card that allows international transactions when abroad. In the case of credit cards, there is a currency mark-up fee of around 3.5% . In addition, there is a transaction fee of 2.5% to 3.5%. Not all credit cards allow international transactions, so you need to check before taking it along.

As far as safety is concerned, the risk on the forex card is limited to the amount you have on that card. Contrast this with debit card or credit card where your entire bank balance or the outstanding limit could be at risk.

Finally, when it comes to carrying foreign currency abroad, it’s better to keep it diversified—keep some hard cash for emergency purposes and do not rely entirely on forex cards or any other plastic cards. You never know when the need to use physical notes arises in a foreign land!

Card rules
The most important fee for a forex card is the ‘currency conversion charge’ which should be as close to the interbank rates as possible.

Use forex cards only for swiping at point of sale and restrict usage for withdrawing cash from ATMs.

The risk is limited to the amount of money you have loaded on to the forex card, making it safer than using a credit or debit card abroad.

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