Indians are increasingly learning the art of travel. We have now been to exotic locations across the globe. As per a recent report, international travel has grown faster than domestic travel in India. Despite slower progress in economy and job market, Indians are not shying away from spending on international trips. This growth in the international travel market can be attributed to better technology which made travel search easier and brought bookings from travel agents right to the palm of your hand.
Credit cards have played a significant role in encouraging overseas vacation among Indians, especially the millennial population. Plastic money is easier and safer to use than cash. And when it is combined with exquisite travel benefits, it works out the best for frequent flyers. However, it is important to understand the privileges that are offered on your credit card before putting international travel expenses on the card. Also, if you wish to get a new credit card particularly for funding your lavish travels, these tips will help you decide.
Consider the Fees and Charges
Using your credit card in a foreign country attracts certain fees and charges. Most of the card users think that they just have to pay the amount equivalent to the value spent in the domestic currency when the bill is generated. But, in addition to this, your bank also charges foreign exchange mark-up fee. This fee is charged as a percentage of the amount spent and usually ranges between 3-3.5%. Some travel credit cards offer lower forex mark-up fee to attract customers, such as-
Read more about: Best Travel Credit Cards in India
| SBI Card ELITE | 1.99% |
| HDFC Regalia First | 2.00% |
| YES FIRST Preferred Credit Card | 1.75% |
| IndusInd Bank Legend Credit Card | 1.80% |
| HDFC Infinia Credit Card | 2.00% |
Let us understand this with the help of an example. Suppose you spend $145 in the US and the value of rupee is 65 against US dollar at the time. In this case, you would have to pay Rs. 9,425. Now considering the forex mark-up fee as 3.5%, you would have to pay Rs. (9,425*3.5%) = Rs. 329.87 as the forex mark-up. The total amount that you would have to pay will be Rs. (9,425 + 329.87) = Rs. 9,754.87.
No bank has yet launched credit card with zero forex mark-up fees in India. When travelling abroad, you must consider this charge so that you do not end up paying too much.
Another important charge is the cash withdrawal fee also known as cash advance fee. This is charged by the bank as a percentage of the amount withdrawn from an ATM using your credit card both in your home country and abroad. But when you withdraw money from an ATM outside the country, you will have to pay the cash withdrawal fee plus the foreign exchange mark-up fee. Moreover, cash advances on credit card are not eligible for the interest-free period so you will pay the interest from the day of making the transaction until you pay it back in full. All this makes cash advances highly uneconomical on your pocket. Do not withdraw cash in a foreign country unless absolutely necessary.
Think Beyond Air Miles
When you shop for travel-centric credit cards, you will come across several banks that offer air miles on your spending which can be redeemed for booking flight tickets. Some provide normal reward points which can be converted into air miles. But you should not get a credit card just for earning air miles. Other privileges should also be taken into consideration- whether the card offers cab and hotel discounts or there are any brand related benefits. Think of how you can make the most of your credit card rewards. Know your spending personality and get a credit card that offers maximum benefit on expenses that you make frequently. Say you ring all your grocery bills on your credit card; in that case it would be great to have a card that provides extra rewards on grocery shopping.
Understand the redemption procedure on your credit card. Look for how easy or difficult reward redemption is. There are a few questions you need to ask-
- Can these rewards be converted into air miles?
- If yes, is the redemption specific to a particular airline brand?
- What is the rate of conversion when rewards are converted into air miles?
- Are air miles useful for transactions other than flight ticket booking?
If you own a credit card with airline brand specific benefits, it is advisable to get another one with more generic benefits. Brand loyalty sure pays off but the card may not offer extra features on other fronts. So it is better to apply for a credit card that has a low forex mark-up fee, offers extra travel benefits and lets you earn more rewards on international transactions.
One more important thing that frequent flyers should focus on is the lounge access. Go for credit cards that provide complimentary international airport lounge access on less stringent conditions. Some such lounge programs are restricted to certain airline brands; know about these factors in advance so that you are not left hanging at the last minute in a foreign location.
Learn About Travel Insurance
Several credit cards offer complimentary air accident coverage to the cardholders. Before travelling on your credit card, read the terms and conditions related to this insurance benefit. Also, some credit cards provide overseas medical insurance up to a certain amount to cover you if you meet with an accident on your foreign trip. You must be aware of these insurance benefits and related terms and conditions so that you know the privileges given to you and can make the most of it. Travel insurance mostly covers air accident, hospitalization, missing baggage, missing connecting international flights, loss of passport and other documents, etc.
Lost card liability covers are also offered by some of the banks to safeguard you against fraud in case your wallet is lost. In some countries, instances of phishing, data theft and fraud are comparatively higher so you should be extra cautious. Use your credit cards only at well-known stores and keep your card PIN secured in order to protect yourself against such malpractices.
Lastly, you must know that with more rewards and privileges, the annual fee of the cards also tend to increase. Do your research and choose a card that suits your international travels better at comparatively lower costs. Try to get higher sign-up bonus especially those which can be redeemed against travel benefits like flight tickets or hotel stays. Do not get lured by exclusive travel offers; instead read between the lines to know about hidden terms and condition related to these offers.
Credit cards can be your perfect companion when travelling to a foreign country. Being completely aware of your travel credit cards will only make your experience better and more rewarding.