You had been saving up for this wonderful trip to Europe and you finally made it! You spoilt yourself silly with more than an eyeful of Europe – some fine-dining and went a bit overboard with your shopping as well.
You could afford some of the unplanned expenses, thanks to your international Credit Card! You made sure you did the smart things and noted down the exchange rate too on the day you were making the transactions. You did some calculation of your own and determined with all the conversions that your Credit Card bill was likely to tally to around Rs. X.
Additional Reading: Using A Credit Card Abroad
After a jolly good time, you arrive home and begin the daily grind. Soon your Credit Card bill also arrives. What follows is shock (probably one of the biggest you’ve got so far)! The bill amount is nowhere the nice round X number you had in mind. Actually, it overshot it by nearly 5-6%. To avoid such shocks in future, let’s find out how exactly the amount due on your Credit Card is calculated.
Additional Reading: Insight On Credit Card Charges!
Why your calculated value and the amount on the Credit Card statement differ
The two entities involved in the transaction apply additional fees for a foreign Credit Card transaction. This results in an additional cost of 5% to 6% for the end user. The first entity is the issuing bank like SBI or ICICI Bank, and the second is a network service provider like VISA and MasterCard.
Why is this additional fee applied?
The primary reason is the intricacies and additional cost involved with currency conversion. Yet another reason is addition of a small margin of profit by the issuing bank and Visa/MasterCard.
What is the type and amount of charges involved?
There are basically three types of charges involved:
- Foreign Currency Conversion fee – Since you own an Indian Credit Card, your balance is automatically in Indian Rupees. When you make an overseas transaction, say 50 Euro, you will be charged a foreign currency conversion fee as well. Visa and MasterCard automatically charge a 1-2% fee on foreign currency exchange and anything in excess of it is generally a small margin of profit for the bank.
- Foreign Transaction Charge – Irrespective of the currency, transaction amount, or cash withdrawal, providers (SBI, ICICI, HDFC, BOB, PNB etc.) charge a Foreign Transaction Charge, which makes up for around 2.5 -3.5% figure of the total transaction amount.
- Cash Advance Fee– It’s common knowledge that cash advances are expensive even within the country. If you are using your Credit Card overseas, withdrawing cash will definitely increase the fees. You can incur a 1-4% additional fee every time you carry out an overseas cash withdrawal. You will also be charged the standard cash withdrawal rate for your Credit Card, together with the international cash withdrawal fee.
What about the currency conversion rate on the day of transaction?
The exchange rate that is applied to a transaction is the exchange rate as of the day of settlement, which is the day that VISA or MasterCard determines the settlement amount to be exchanged between the acquirer and the issuer. The settlement date is, therefore, typically different from the date of the actual transaction.
So don’t be surprised if the exchange rate you were using for calculation differs from what has actually been used, as your transaction might have been posted to VISA or MasterCard one or two days later by your merchant. The exchange rate is calculated one day in advance by Visa and MasterCard and is applicable throughout the day for every transaction at the same rate.
Where to find the information regarding these charges
To avoid surprises in future, it’s advisable to be equipped with the complete knowledge of charges which will be applied on your Credit Card transaction. The data related to Foreign Currency Conversion fees is available on VISA and MasterCard websites. Ensure you have the latest rates by checking these websites before you travel.
Data of Foreign Transaction Charges and Cash Advance Fee is available with the issuing bank like SBI, ICICI etc. and you can call their customer care to find out about the same before packing your bags. These charges are also dynamic and you might see them fluctuating at regular intervals.
How to choose the best Credit Card
If you are a frequent flyer, please enquire about the foreign transaction charges and cash withdrawal fees before applying for a Credit Card. You might find a difference of 1% to 2% in the offers of Credit Cards from various banks. Choose the one that charges you the least. Nothing much can be done about the currency conversion charges as they are levied by MasterCard and Visa.
It is critical to read the offer document of the Credit Card provider. You should not treat it as a piece of paper, which just dies a silent death in the offer envelope. Next time around, at least scan your offer document. Reading between the lines is essential. You will come across a lot of facts which might surprise you. The details of all the charges will be clearly detailed in the offer document. You might not find the exact values as they are pretty dynamic in nature but the rules which govern them are present in the offer document.
Additional reading: Credit Card Handbook: All Questions Answered
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Additional Reading: Is There A Perfect Credit Card for You?
The importance of paying the full amount cannot be stressed more as banks can charge you a hefty interest rate if you just keep paying the minimum amount due! It’s a practice best avoided. Another big no-no is cash withdrawal on your Credit Card – it’s the most expensive form of credit one can incur, so steer clear of it.
Looking for the right travel buddy? We can help.
Thanks for this helpful information I agree with all points you have given to us. I will follow all of them.
Very detailed article. In emergency we ate left with only option of swiping the credit card without caring about the any charges.
It’s always recommended to carry enough cash to the destination country to avoid credit / debit card usage.
Hi Praveen, Thank you for the appreciation and your valuable suggestion. Cheers, Team BankBazaar
if i am purchasing mobile from Dubai and shipping in the dubai (U.A.E) itself but using my SBI Credit card (indian credit card)ot any other indian credit card .then how much i need to pay extra amount on my total purchasing (3300 AED)like any transaction charges or conversion fee from AED to INR.Please suggest .
Hi Mohammad,
Banks charge a foreign exchange conversion rate on transactions that aren’t in Indian rupees and these rates vary from bank to bank. In your case, you should get in touch with SBI to find out the rate and calculate the charges.
Cheers,
Team BankBazaar
Hi, I am trying to make an purchase from a website “imenapparel.com”. The cost of the product is 25 USD. The only payment mode option is Credit Card. I want to know what extra charges will be added to my transaction apart form the conversion rate. i.e 25*65.02=1625.5 INR. Please let me know.
Thanks in advance 🙂
Hi Parth Shah,
Some banks charge transaction fee for international transactions apart from the conversion feee. We suggest that you speak to your bank’s customer care to get the details.
Cheers,
Team BankBazaar
Yes, it’s true that if someone uses their home bank credit card or debit card in Europe you will be ripped off. But there is a solution which is called the forex card.e/
Hi Bipasha,
Thank you for your valuable feedback. We agree that the Forex Card is a good option, but you will be able to use your forex card for only the amount that you have filled it up with. It won’t hurt to keep a Credit Card handy as you can swipe your card in case of emergencies or if you’re running short of funds.
Cheers,
Team BankBazaar
This is all for tax payer&employes only,This is all is not for selfemployes and lower income class!Thanks a lot.
Hi Amol Aryamane,
There is a Credit Card for every income category. Check out this article.
Cheers,
Team BankBazaar
I once swiped my ICICI credit card in a Thailand Resort where the machine gave me an option to choose home currency (Indian Rs) or local currency (Thai Baht).
And when i opted for Indian Rs., the credit card statement didn’t have any Foreign Currency Markup Charges (which is around 3.5% for my card). So saved money here.
How can i continue with this?
Other countries whenever i have swiped my card, it always has taken the local currency and not the Indian currency.
Can you let me know?
Thanks,
Sachin
Hi Sachin,
Sometimes its possible to swipe your Credit Card with your home currency. However, this doesn’t guarantee that you will not be charged a mark-up charge. If you check your statement closely you will notice that there will be an additional charge (whatever the percentage is that is applicable on your card).
But, if you think that that markup wasn’t added then consider yourself lucky 🙂
Cheers,
Team BankBazaar
I will defiantly choose Forex Card instead of credit card as it usually have a flat Foreign ATM Withdrawal fee which is low as compared to credit card and debit cards. Also, Forex Cards have their exchange rate locked in advance.
Hi Aananya Singh,
Sure. But Forex cards have to be loaded whereas a Credit Card will have an upper limit and is useful during a financial emergency.
Cheers,
Team BankBazaar
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We use wordpress. Good luck to you.
Cheers,
Team BankBazaar
There is a markup fee charged on internatinonal transactions. But what happens if there is a refund?
1. Would I be refunded the markup fee charged too?
2. Would markup fee be charged again for refunds?
Hi Kunal, Most banks do not charge any markup fee on refunds for foreign transactions if the transactions take place within the same billing cycle. The bank, however, will not refund the markup fee, although this varies from bank to bank and their terms and conditions. It’s best you get in touch with the concerned bank for any clarification on this issue. Cheers, Team BankBazaar.
Hi,
I am Shikha from Delhi. Can I use Axis bank credit card when traveling to Aboard?
Hi Shikha, Only some Credit Cards can be used for international transactions. Check with Axis bank if you can use your card. Cheers, Team BankBazaar.
I used my Hdfc credit card in Saudi and in Indian rupees the transaction was made 10000 rupees extra ! I am shocked
Hi Gurveen, There are foreign exchange and transaction fees applied on your overseas spends. Kindly check with your card issuer regarding these charges. Cheers, Team BankBazaar.
If I am living in India but buying products from overseas which are in Euros, is there any limit to the volume of transactions I can do? Does it violate FEMA guidelines if I cross a certain threshold?
Hi J, As far as we know, the applicable credit limit for the card will be the limit fixed by the card issuing bank. There is no monetary ceiling fixed by the RBI for remittances, if any, under this facility. Please contact a chartered accountant for more details. Cheers, Team BankBazaar.
Hello,
It is good article about credit card. But I am not getting enough information about Cash withdrawal charges using debit card in abroad?
I am assuming that in such case, just “cash advance fee” will not be charged.
Only “currency conversion” & “foreign transaction” charges will be levied?
Thanks
Jen.
Hi Jen, You’re right. Cash advance fee is not charged on Debit Card transactions abroad. However, a withdrawal fee might be charged. This depends on the bank. Cheers,
Team BankBazaar.
It was really a good article; sharing information about transaction & other charges while swiping your cards abroad.
Hi, You’re welcome. Keep reading! Cheers, Team BankBazaar
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Hi, Thanks, but no thanks! It’s our way, not survey! Cheers, Team BankBazaar
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Hi, Thanks for your suggestion. However, we’ve got a bunch of extremely talented content specialists already. Cheers, Team BankBazaar
Hi, nice article!
I am a student and I wanted to buy monthly subscription at Coursera.org for online courses . Although when I tried using my SBI debit card for payments they didn’t accepted it and when I read their help article they clearly mentioned the following :
“Unfortunately, learners in India can’t make payments on Coursera using
NetBanking
eWallet (PayTM)
Local credit cards
Local debit cards
”
now, considering the above mentioned scenario kindly suggest a way through which I can pay instead or which card/s can I use.
also are SBI credit cards useful for international payments like this ?
Hi Alankrit, Most Credit Cards can be used to make international transactions. However, there will be a foreign transaction fee attached to it. Please try using a Credit Card to make the payment. Cheers, Team BankBazaar
Can i use my HDFC Diners Club Credit Card for payments in Europe .
Hi Niki,
You will have to check with your bank to see if this is an “international” Credit Card. International Credit Cards can be used outside the country. However, some cards may not be international but then you could call up your bank and enable a certain feature so you can enjoy using it abroad as well. But your bank needs to confirm if this is possible. Please get in touch with HDFC for this.
Have a nice trip!
Cheers,
Team BankBazaar
I have encountered the problem of transferring money from domestic banks to foreign countries and it is very expensive. The improper use of the card by the card to send costs is not small compared to the value of the money transferred. Currently, I have switched to using a Visa card that is much more convenient, the cost has also been reduced. This article is very helpful, helping me to know the good banks in the world to trade, I highly appreciate Citibank.
Hi there,
Thank you for your kind words. We’re delighted to receive your feedback and are glad to know that you find our blogs useful. We sincerely appreciate your insights. Please keep reading our blogs for more such insights into the world of personal finance.
Cheers,
Team BankBazaar