Before reading through the list of foreign transaction fees that most major credit cards charge in India, it is important to understand what a foreign transaction fee is and how it works.
A foreign transaction fee is an amount that credit card companies charge their customers whenever a transaction is made with a foreign currency or perhaps, passes via any foreign bank. To process a foreign transaction, the card issuer charges a percentage of the total transaction amount, which is usually 3% or more.
The details about the foreign currency transaction fee are mentioned in the statement separately. Therefore, it is vital to read the guidelines and other charges involved with foreign transactions before applying for a credit card.
Usually, MasterCard and Visa charge a foreign currency transaction fee of 1%. However, most credit card companies add an extra percentage on it, making the fee range from 1.5% to 3% or even more. Therefore, this fee differs from one credit card issuer to the other.
It is mandatory for every credit card issuer to disclose or reveal the fees involved with the foreign transactions at the time of issuance. If the issuer fails to do so, a settlement has to be paid to the cardholder.
However, this rule was applied earlier. Now, all this information is explained clearly in the credit card agreement. Therefore, it is crucial to read the entire credit card document carefully before applying. These essential details are also mentioned on the issuer’s official website.
The foreign transaction fee is assessed by the credit card issuer and is typically in the form of a percentage, 3% being very common. However, this percentage can vary from one issuer to the other. While 3% as a foreign transaction fee may not seem much, keep in mind that this applies to each foreign transaction that you make with the card.
Say, for example, you are someone who frequently travels abroad and shops the most on foreign websites, then cards with foreign transaction fees might not be the ones for you because paying those additional charges every time you make a foreign transaction with the card can actually turn out to be expensive when you calculate it for the entire year. In such cases, look for a card that doesn’t include them.
Fortunately, not all cards charge on foreign transactions. There are a few that don’t impose this fee. However, such cards need to be researched.
If you have taken trips to abroad, then you would know how expensive it is to exchange the cash for local currency. Be it international ATMs or airport kiosks, you will always end up paying some extra funds to receive the cash.
However, what most of them are not aware of is that this concept applies to credit cards as well. Each time the credit card is swiped, you are being charged a fee for the currency conversion.
Unlike a foreign transaction fee, a currency conversion fee is not charged by the issuer or the credit card company. In fact, it is assessed by the payment processor of the card. Both MasterCard and Visa charge 1% of the amount that is spent overseas. It depends on the country you are traveling in.
Usually, the payment processor charges 1% to the issuer but they pass this fee to you. Now, this literally means that you will have to pay both foreign transaction fee and currency conversion fee each time a purchase is made with the card.
The trickiest part of the currency conversion fee is that it doesn’t appear separately on the credit card statement. They are just included in the foreign transaction you have made. Moreover, there is no clarity on how much conversion fee the credit card company charges their customers.
Customers usually compare the amount on their receipts with the ones that appear on the statements to know exactly how much the bank or the credit card company is charging.
The Cross-Currency Markup is charged on each time a foreign transaction is made with the Indian credit card. Usually, credit card issuers in India charge 3% to 5% but this differs from one bank to the other.
Also, this is applied to the “settlement date” and not on the “transaction date.” The currency conversion markup fee of few of the leading banks in India are as follows:
Two of the commonly accepted payment networks – MasterCard and Visa, act as the mediators between the merchant from which a foreign purchase is being made and the issuing bank (HDFC, SBI, Kotak Mahindra, ICICI, Axis, etc.) Therefore, when you use a credit card outside India, both these payment networks charge 1% on the issuing bank and 2% if the payment network is different.
Therefore, it is important to read the charges before making any kind of foreign payment through the credit card.
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Transactional data that includes information about credit card usage or GPS location tends to have more ‘information value’ than ‘aspirational data’, which refers to information that is obtained from social media posts, said professor Roberto Rigobon.
He was speaking at an event that was organised by the Reserve Bank of India (RBI). The topic of his lecture was ‘Big Data and Measurement: From Inflation to Discrimination’. He further added that the main advantage of organic data is the fact that it is non-intrusive and in most cases, people are more truthful when it comes to data generation.
He stressed on the fact that people do not lie try to manipulate their GPS data, and the same logic applies to Google as well. He warned that this principle is not the same for all types of data sources. Keeping all this in mind, the MIT professor said that transactional data is better than aspirational data in terms of the value of the information that is obtained per observation. The professor concluded that credit card transactions are a very good example of transactional data. And the same goes for GPS based data. The least favoured, he said, was social media-based data.
7 August 2018
