Last Updated: Wed, 1st Sep’21
If you travel abroad for work and leisure on a frequent basis, you might be knowing that foreign trips involve a wide range of expenses which must be dealt with wisely. Debit/credit cards have been travelers’ preferred payment mode for a long time as they are easier to carry than hard cash. Debit cards are deemed convenient to use because all it takes is one swipe to pay abroad. People who are unaware of transaction charges hold the view that debit and credit cards are an economical one-stop solution for all money-related matters.
The bonus points ensuing from debit card usage entice people and lead them into believing that they are saving a whole lot of money. Due to a lack of knowledge about debit/credit card international transaction charges, people fail to comprehend how banks employ cunning tactics to rob them of their hard-earned money. Whenever you swipe your card outside your home country, the transaction involves several parties like your bank, the merchant, etc. All these parties deduct their share from the transaction without letting you know it.
For generating substantial revenue, debit/credit card issuers include a markup fee on overseas transactions. Since the markup fee is determined by the card issuers, they can charge you as much as they want and this can shatter your money-saving goals. In addition to all the usual fees, customers are also charged for the coverage of expenses of the services offered by the bank.
let us take a look at the major types of debit/credit card transaction charges.
1. Foreign transaction fee
Foreign transaction fee is basically a surcharge that you have to bear when you use your debit card during international travel. Whether you use your card for shopping or paying a restaurant bill, your card provider will impose a fee on you for the same. The foreign transaction fee that will be charged by your debit/credit card issuer will typically be in the range of 1% to 4% of the transacted amount.
2. Currency conversion fee
Since your card is issued in India, whatever balance it has is reflected in the Indian currency (i.e., INR). When you run your card through an electronic reader overseas, the payment is not made in the Indian currency. Rather, the money in your card gets converted to the currency of the destination country. Based on the amount converted, both Mastercard and Visa levy a currency conversion fee of up to 2%.
3. Cash advance fee
Cash advance fee is another common charge that follows credit card usage for ATM withdrawals. You will be subjected to the cash advance fee regardless of whether you use your credit card in India or a foreign country. In India, the cash advance fee is usually between 2.5% to 3% of the total amount. This fee will be relatively higher when you withdraw money from ATMs in foreign countries using your credit card.
4. ATM withdrawal fee
When you resort to using an ATM abroad, you are made to pay international debit card withdrawal charges. Take note that you can withdraw only from the ATMs of those international banks which have tie-ups with your debit card issuer. So, the withdrawal fees you are charged goes to the international bank whose ATM you utilized for withdrawal purposes. Each time you use an ATM overseas for cash withdrawal, you may have to shell out as much as 4% of the money withdrawn. Some ATMs even demand a flat fee of $5 which can again add to your expenses.
5. Overlimit fee
When cardholders make purchases abroad and surpass their card’s credit limit, they are subjected to an overlimit fee. Such a situation usually arises when unexpected expenses pop up and you are left with no choice but to exceed the credit limit of your card. The overlimit charges could be up to 2.5% of the amount spent beyond the limit of the card. Therefore, it always pays off to be aware of your debit/credit card’s spending limit.
Popular Debit Cards and their Charges:
|Card Provider||Foreign Transaction Fee||Cash Withdrawal Fee|
|BookMyForex Travel Card||Zero||2 USD|
|SBI Card||3% + GST||Rs. 100 + 3.5% + GST|
|Axis Bank Card||3.5% + GST||Rs. 125 + GST|
|HDFC Card||3.5% + GST||Rs. 125 + GST|
|ICICI Card||3.5% + GST||Rs. 125 + GST|
|HSBC Card||3.5% + GST||Rs. 120 + GST|
|Citi Bank Card||3.5% + GST||Rs. 125 + GST|
|Standard Chartered Card||Rs. 140 + 0.07% - Rs. 770 + 0.014%||Rs. 140 + GST|
|Kotak Mahindra Card||3.5% + GST||Rs. 150|
Popular Credit Cards and their Charges:
|Card Provider||Foreign Transaction Fee||Cash Advance Fee|
|BookMyForex Travel Card||Zero||2% of transaction amount (exclusive GST)|
|SBI Card||3.5% + GST||2.5% or Rs. 500 (whichever is higher)|
|Axis Bank Card||3.5% + GST||2.5% (Min: Rs. 500)|
|HDFC Card||3.5% + GST||2.5% (Min: Rs. 500)|
|ICICI Card||3.5% + GST||2.5% (Min: Rs. 250)|
|HSBC Card||3.5% + GST||2.5% (Min: Rs. 500)
|Citi Bank Card||3.5% + GST||2.5% (Min: Rs. 500)|
|Standard Chartered Card||3.5% + GST||3% (Min: Rs. 300)|
|Kotak Mahindra Card||3.5% + GST||Rs. 300|
|Amex Card||2.7% + GST||3.5% (Min: Rs.250)|
Here are some frequently asked questions about debit/credit card transactions.
Q1. How long does it take for a credit card transaction to get posted?
Many people tend to believe that their credit card bill is posted on the same day of making the transaction. In reality, merchants post the transaction to your payment network processor (Visa, Mastercard etc.) within 1 to 3 business days. This is one of the main reasons why your overseas purchases do not show up instantly in your credit card statements.
Q2. How is the currency conversion rate applied to credit card transactions?
Another widespread misconception is that the conversion rate prevailing on the day as making a credit card purchase is the same rate that is applied to the transactions when they are processed. Since credit card payments are posted to the card networks after 1 to 3 days, the currency conversion rate on the day of the transaction is not taken into consideration. Once the payment is posted and the card networks process the transaction, they consider the conversion rate of the preceding day to prepare the final bill.
Q3. Can debit cards be used for international transactions?
Debit cards can be broadly categorized into 2 categories – domestic and international. If you possess a debit card that supports international usage, you can use it for transactions overseas. Confirm with your bank in advance whether your debit card supports the currency of the country you are visiting.
Q4. How much is international transaction fee?
The transaction fee for international purchases differs from one debit card to another. It also depends on the country where you swipe your debit/credit card. Generally, the international transaction fee is around 3%. Some percentage of this fee goes to the card issuer and some of it may go to the payment network processor.
Q5. Do Visa cards have foreign transaction fees?
The usage of all debit/credit cards abroad results in the incurrence of foreign transaction fees. No matter the type of card, the transaction fee is applied to all international transactions and it has to be borne by the owner of the card. So whether you own a Visa card or a Mastercard, you cannot do away with the hefty foreign transaction charges.
Q6. How do I ward off international transaction charges?
As long as you utilize your debit/credit card for overseas transactions, there is zero to no chance of avoiding international transaction charges. Eventually, you will have to look for an alternative. The best way to ward off international transaction fees is to get your hands on a prepaid forex card from a reputed foreign exchange platform like BMF. Forex cards make it possible for travelers to dodge transaction charges, thus guaranteeing up to 6.5% savings over debit/credit cards.
International trips can prove to be quite rewarding, especially when you are vacationing in your favorite destination. However, it is crucial that you estimate your expenses in advance to avoid payment-related hassles during your trip. Creating a realistic budget some weeks prior to your travel can prove worthwhile for increasing your savings in the long run
The biggest drawback of using debit cards abroad is that the bank subjects you to plenty of unnecessary service fees. Since the exorbitant international debit card charges can negatively affect your budget, you should rely on a forex card for managing payments in foreign countries. A travel forex card will not only boost your savings but will also enhance your payment experience to a great extent.