How much foreign currency to carry and how to carry it are two questions you need to answer while planning a trip abroad. Using just cash is not advisable, especially if your holiday is a long one. Other than hard cash, there are a few other ways you can carry forex — travellers cheques, plastic money in the form of debit and credit cards, and prepaid travel cards.
Each of these comes with its own pros and cons. Using a credit card abroad for foreign currency transactions may be fine but it is expensive. If one uses a credit card abroad, there will be conversion charges, and if used at an ATM, an additional fee is levied. “For amount spent abroad using Indian credit card, the fee will differ from issuer to issuer, merchant to merchant and currency to currency but would consist of conversion charges ranging from 3.50% to 5.00% and if credit card is used for withdrawal of foreign currency from ATMs abroad an additional withdrawal charge of 2% to 5% (depending on the issuer) is levied,” says Mohan Bhaktha, Executive Director, Weizmann Forex.
A prepaid forex card is another option you can consider. “These are the safest option (compared to cash) since they are enabled with PIN protection, can be swiped for all sorts of transactions and are attractive in terms of pricing,” says Anand Tandon, CEO & Founder, Myforexeye.com.
What is a prepaid travel card?
A prepaid card can be loaded with multiple currencies on a single card. However, if you are visiting just one country, it’s better to load only a single currency. “The maximum amount which can be loaded is equivalent of $2.5 lakh per annum per individual for the purposes covered by the Liberalised Remittance Scheme (LRS) notified by RBI,” informs Bhaktha.
If you are planning on going on a holiday abroad this summer, here is what you should know about prepaid forex cards.
Where to get it
You can get a prepaid forex card from a bank or an authorised forex dealer (also known as money changers). You don’t even need an account relationship with the bank to purchase the card. One merely needs to fill the application form with personal details, amount of foreign currency etc, and submit a self attested photocopy of one’s passport. Some may require a copy of the visa as well, hence get a confirmation on the required documents.
There various options to choose from, so select a card as per your need.
Charges to be aware of
As with anything else, you need to be aware of the various charges while using a prepaid forex card card. Once the card gets loaded with forex, you don’t have to worry about the conversion charges anymore. Although there is no charge for swiping the card at a merchant outlet, you will have to pay a fee for transactions like balance enquiry.
Here are few of the charges based on usage:
Cash withdrawal charge- The cost you incur when you swipe the forex card at any ATM and withdraw cash.
Balance inquiry charge – The charge for checking your balance at an
International SMS alert charge (monthly) – For receiving SMS alerts when aboard
Replacement card fee (Domestic) – In case you need replacement within India
Replacement card fee (International) – In case you need replacement abroad
6. Statement request charge – On receiving statements
Charge slip retrieval charge – Charge for getting a transaction slip at an ATM
8. Cross currency markup charge- When the transaction currency is different from loaded on the card (for instance, if you have loaded the card with dollars and have to make a transaction in euros), you may be charged a ‘cross currency markup’ of 3-3.5 percent on such transactions. Some bank may issue ‘Zero Cross Currency Conversion Charges’ where you can use the card in any currency for cash withdrawals and making merchant payments.
9. Inactivity Fees: Inactive period on the card is defined as absence of any debit or credit on the forex card for a consecutive period of more than 6 months. Some banks may levy this.
Things to confirm while purchasing forex cards
There could be a daily limit on the usage, say only $200-300 can be spent per day.
Activation: Get to know from the issuer how to activate the card, and more importantly how to re-generate the card PIN in case you forget it abroad.
Have the helpline number handy.
Things to keep in mind
Safety: International fraud in cards is known fact. Tandon says that one should make sure that the card is always swiped in front of you. “Cloning of cards is the biggest threat and at times the card can be compromised in terms of usage.”
Since the card is loaded with foreign currency, you should not swipe your card at a place where the transaction’s value is in Indian rupees. What will happen here is that when you swipe your card and the transaction takes place in rupees, you will incur a conversion charge as your card is loaded with foreign currency.
At the ATMs:
When you are prompted at ATMs or merchant outlets you should select the credit card option as there won’t be a separate option for forex card.
When you return
: When you return, get your balance on the card encashed as holding large amounts of foreign currency is prohibited. “As per RBI laws, the balance amount held in the forex card should not exceed equivalent of $2,000 dollars,” says Bhaktha.
There could be different types of insurance cover on these forex cards. Confirm from the issuer if it comes with coverage for protection against misuse of lost card or due to counterfeiting, personal accident insurance and loss of checked baggage cover provided on the card. Some cards cover ATM assault and robbery including the expenses incurred towards medical treatment.
What you should do
It is advised that when you travel abroad, you should not carry forex in just one mode; carry a certain amount of hard cash, and the remaining use your forex card. “One should choose depending upon their usage. Suggested breakup mix of cash and travel card is in the ration of 20:80,” says Tandon.
Since the Indian rupee is not a widely accepted currency internationally, you should be wise about how you carry your forex when you travel out of the country. For instance, don’t get swipe-happy with your credit card, along with processing fee you will be charged a conversion fee. Exchanging money at an airport is much more expensive than getting it done at a money changer in India or withdrawing from an ATM abroad.
There are costs in any way you choose, but exploring the options in advance will keep them under control and will not play spoilsport with your holiday.
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