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Travellers who often go visit foreign countries can use their credit card to make international payments. Credit card payments are much more secure than cash or travellers cheques. This security and convenience come at a price which is known as a foreign transaction fee. Please see below for more details on foreign transaction fee on credit cards.
Key Highlights of Foreign Transaction Fee on Credit Cards |
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Whenever you conduct a transaction overseas, banks and credit card networks charge a fee to convert the denominations. The credit card network such as Visa and MasterCard charge 1% of the amount as fee. Many banks also charge anywhere between 0.99% and 2.5% of the amount as mark-up fee.
| Credit Card | Foreign transaction Mark-up Fee |
| HDFC Bank Regalia Credit Card | 2.00% |
| HDFC Bank Diners ClubMiles Credit Card | 3.00% |
| Axis Bank Burgundy Private Credit Card | 0.00% |
| Axis Bank Magnus Credit Card | 2.00% |
| RBL Bank World Safari Credit Card | 0.00% |
| YES FIRST Preferred Credit Card | 1.75% |
| YES Prosperity Edge Credit Card | 3.00% |
| HSBC Visa Platinum Credit Card | 3.50% |
A foreign transaction fee is applied in the following situations:
From a bank’s perspective, you can conduct only two types of foreign transactions namely:
When you conduct a transaction in USD, your Indian credit card first converts the amount into Indian Rupee. They then apply the foreign transaction mark-up fee on the amount. You will have to pay this amount as the Forex Mark-up Fee.
For example, if you purchased an item worth 100 USD and the exchange rate is 1 USD = INR 70. In this case, the payable amount in INR will be Rs. 7,000. Now if the foreign exchange mark-up fee is 3.5%, it will be Rs. 245 (3.5% of 7,000). GST at 18% will also be applicable on the fee amount.
When you conduct a foreign transaction in any currency other than US dollars then the amount is first converted into US dollars. Afterwards, the usual process takes place and the amount is converted into Indian Rupees. The mark-up fee is applied at this juncture and the final amount shows up on the customer’s credit card statement.
You may incur the following charges when conducting international transactions. Note that these charges are not necessarily applicable; they are subject to the situations as mentioned below.
Tax – Goods & Service Tax (GST) will be applicable on all the fees and charges that your international transactions incur. It is currently at 18%.
Cash Withdrawal Fee – Cash withdrawals done overseas like any domestic withdrawals will incur this fee. The minimum amount can range from Rs. 100 to Rs. 300 and maybe more.
Finance Charges – If you withdraw money or fail to clear your dues by the due date, then finance charges will be applied. The rate can be anywhere between 23% and 42%.
Do all monetary instruments charge a mark-up fee on overseas transactions?
No, cash transactions, traveller’s cheques, Forex cards and certain credit cards do not charge a mark-up fee.
Which is better Cash, credit card or travellers’ cheque?
Amongst the three, a credit card is the best monetary instrument for international travel. This is especially true if the card charges 0% currency conversion fee. They also keep your finances secure. Meaning you can cancel/dispute a transaction later on. This facility is not provided by the other two means. Also, cash & travellers’ cheque can be easily misplaced or stolen. Though, you get a small window of time to cancel travellers’ cheques. Travellers’ cheques also require that you pay a commission fee to get them and use them. They are also prepaid.
How can I find out how much am I charged on foreign transaction fee?
At the time of credit card application, you were handed a Most Important Terms & Conditions handbook. You can find the rate under Foreign Currency Transactions fee. You may also contact the credit card provider to know the foreign transaction fee.
Will Finance charges be applicable if I do not pay the foreign transaction amount?
If you fail to pay your whole bill regardless of its contents by the due date then finance charges will be applied.
Is there a credit limit on international spends?
Credit card providers don’t usually set a separate international spend limit. However, some banks allow users to set an international spend limit. You also have the option to activate or deactivate international spends.
