If you’ve ever done a few international trips, there’s a chance you would have an envelope or a Ziplock bag somewhere in your home closet with random currency notes and change. For me, while I try to keep the foreign currency to a minimum, it continues to be a challenge bring it down to zero.
There are many reasons not to keep foreign exchange in cash. For one, I earn and spend in Indian rupees, and hence, my money works when it is in a bank or in an investment, not when it is sitting in currency form. The second, and more important one, is when I had my pocket picked back in 2009 in Paris, it set me on course to find a better solution to spending abroad. Since then, I’ve carried minimal cash during international trips, choosing to spend on a credit card and pay the bank after my return.
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Many people seem to take objection to this approach, but it has worked for me. Their chief trouble is with the fact that banks charge up to 3.5% interchange fee (plus 18% GST), which makes it a 4.18% charge for using the card abroad.
With the card, I am able to keep track of how much and where I spent my money, without collecting receipts from every outlet. It also helps keep proof of spend for any expenses that may be incurred on behalf of work on an international trip.
Second, as long as you pay with the right credit cards, your forex interchange fee is made good with reward points, which are more than usual. For instance, the American Express Platinum Charge Card offers three times the usual points on all non-INR spends, and Citi Prestige offers two times the usual points.
But the most pressing reason for me to use a credit card is the purchase protection it offers. Imagine you have paid for a product or service abroad, which turns out to be defective when you actually receive it. But now you are back in India, and the merchant has no way to hand you the cash. The merchant can, however, reverse the credit card transaction. And if they refuse to comply with a genuine request, one can always dispute the charges with the card issuer, something you can’t do when you paid in cash.
Many other high-end credit cards from banks that are unable to extend reward points offer a lower interchange fee on spending on their credit cards altogether.
For instance, HDFC Bank offers a 2% interchange fee on the Infinia, and Yes Bank offers 1.75% interchange fee on the Yes First Exclusive Credit Card. It would help to call your bank to ask for a card with low forex charges. Yet another entrant to the market, RBL World Safari Credit Card offers 0% markup. It, however, does not offer any points on international spend.
One of the anti-consumer moves while swiping plastic is to stay clear of the Dynamic Currency Conversion. This is where an outlet offers the option to pay in your local currency (rupees) over paying in their local currency.
The currency conversion is always worse off for the customer, and your 0% markup or extra reward points go down the drain in this case.
Another popular solution among Indians is the pre-loaded forex card. The exposure here is limited to the amount that you have stored on the card. But you can also reload online (if you have a forex card issued by a bank), or alternatively have your forex dealer send you a reload after you pay them in India.
Fintech companies have made some moves to ease spending money abroad without too many overheads. Fintech firm Niyo, for instance, has created a product, Niyo Global, which is a zero-balance account with zero forex markup.
Another neobank, Fi Money, has the same proposition on their debit cards as well. It came very handy during my last trip to France in September 2021. The rates matched the Visa website, and my money earned interest till it finally left my bank account.
I don’t find myself making a call to the forex dealer anymore to exchange currency before I depart India. Withdrawal charges for the use of ATMs abroad are about the same as forex dealers offer to drop the exchanged money in Delhi, as long as you are careful and do not head to a sneaky ATM from the likes of Euronet that charge their own fee atop of the Indian bank’s charges to withdraw money.
I just make a withdrawal using a debit card on arrival for small change expenses. For businesses that accept digital payments, I pay with my zero-markup debit card such as that from Fi, and big spending goes on the credit card. That way, I have recourse, if something goes wrong.
Plastic money is the way to go to manage your spending when travelling. The days of buying pizza with your crypto are not coming anytime soon, and travellers’ cheques are history. What is present, is the choice between cash and cards.
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Business of Travel is a column for travellers by a frequent traveller. Expect to read all things aeroplanes, hotels and loyalty here.
Ajay Awtaney is the founder and editor of LiveFromALounge.com, an India-focussed frequent-travel website.