Forex Card: More expensive than Credit / Debit card for foreign currency transaction

There is a notion that Forex Cards will save you money when it comes to foreign currency transaction transactions. This notion is promoted by most banks to their customers who are looking travel abroad or spend online outside India. In this attempt banks even undermine their Credit/Debit card saying there is foreign currency transaction and force Forex cards on consumers. However, the reality is very different and you often get lower transaction rates on Credit/Debit cards than your forex card. Let have a look.

Forex Card: 0% foreign currency conversion fee + Rs 45 reload fee

Debit / Credit Card: Up to 3.5% foreign currency conversion fee

At first look Forex Card look very attractive as there is only a flat Rs 45 reload fee and no conversion charges. But these two are very different product and operate in a very different way. Below is how both card actually function.

Forex Card: You buy for forex currency directly from the bank at rates which is 2.5% higher than current market rate.

Debit / Credit Card: Currency of payment gets converted to your local currency at Visa Global Exchange rate + up to 3.5% charge by your bank

Therefore, with forex card you are basically buying forex currency directly from the bank at bank prescribed rate. Banks charge around 2.5% premium on current currency exchange rates when you buy any foreign currency from them. So in reality you pay 2.5% + Rs 45 reload fee. When you also take the card issuance fee into account, the actual cost will be much higher. Also, the process of getting a Forex Card is complicated as you need to visit branch and submit passport copy etc. The reload process is also troublesome as you need to reload each time before use or risk of leaving balance in Forex card when currency rates fall.

On the other hand, if you use your Debit or Credit card is much straight forward and you are only charged a flat conversion charge up to 3.5% by most banks. Also, some banks offer reduced currency conversion rates of 2% for certain credit cards. The visa exchange rate is almost same as the exchange rate you find in Google or any other site.

If you are still not convinced, we will demonstrate this through an example.

Forex Card: HDFC Multicurrency Forex Card

Transaction Amount: €154

Google Exchange Rate: Rs 13,292.44

HDFC Exchange Rate: Rs 13,539.68 (Rs 247.24 higher)

Visa Exchange Rate: Rs 13,371.3426 (Rs 78.9026 higher)